Financials will lead the next market rally as margins bottom: Rohit Seksaria

Indian stock markets may be nearing their next big rally – and the financial sector (BFSI) could be the sector leading the way, says Rohit Seksaria, fund manager at Sundaram Mutual. Speaking to ET Now, he said that with government tax cuts, GST rationalisation, RBI rate cuts and liquidity measures kicking in, macro conditions can finally align for a meaningful earnings revival.

The financial sector is ready for the start

Seksaria highlighted that lenders initially saw pressure on net interest margins (NIMs) due to interest rate cuts. But now that NIMs have bottomed out and asset quality concerns are subsiding, the sector is well positioned for strong gains. “Most asset quality issues were temporary. With valuations still reasonable, BFSI will lead the rally,” he said.

The recovery in consumption is still patchy, but will improve

While sentiment around local consumption remains mixed, Seksaria sees visible tailwinds from VAT cuts, income tax cuts and lower borrowing costs. These factors, he said, will provide consumers with more disposable income and revive demand in the coming quarters.

Sectors we have to be careful with

Despite the broader market hitting new highs, especially the Nifty Bank, Seksaria remains cautious in two areas:

1. Infrastructure and capital goods

Seksaria expects a slowdown in government capital spending, driven by lower tax revenues and budget constraints. “Infrastructure companies are struggling if order books do not grow. I would remain underweight.”

2. Global cyclical sectors

He also prefers to avoid metals and energy given global uncertainties and slower international demand cycles.

In short

With the financial sector stabilizing, consumption likely to recover and macroeconomic tailwinds in place, the market’s next move could be driven by BFSI and select consumer names – while infrastructure and global cyclical sectors may require a more cautious approach.