“Unfortunately, there’s nothing left as value in Indian markets anymore,” Shah told ET Now. “Everything is expensive. But in such an environment, companies with clear earnings visibility won’t be punished just for valuations. Growth visibility is the key.”
Capex: Winners and Losers
On the infrastructure and capex front, Shah drew a sharp distinction. While defence, shipbuilding, and power transformers remain overweight calls, he warned investors to be cautious with the rest of the pack.Between FY21 and FY24, overall capex in India surged 20%, but FY25 saw growth slump to just 9%. Markets expect a sharp rebound, but Shah was sceptical.
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“The market thinks that 9% growth was a one-off because of elections and heavy rains,” he explained to ET Now. “But we don’t think so. Structurally, capex growth will only move to around 11%, far below the 17% expectations. That’s why we remain negative on large parts of the capex space, including cement.”
Consumption: Quick Commerce Over E-commerce
On consumption, Shah backed the promise of quick commerce, where profitability has improved after competitive pressures eased.“If you look at the last couple of quarters, quick commerce companies have shown strong earnings traction,” he told ET Now. “We believe that momentum will sustain. E-commerce, on the other hand, is still battling rising competition and earnings downgrades, especially in areas like beauty.”
This divergence, he believes, will only widen as investors reward firms with clear growth paths.
Small and Midcaps: Cautious Optimism
When asked about mid- and small-cap stocks, Shah acknowledged their challenges.
“Smidcaps are very rich,” he said. “They’ve already underperformed the Nifty by about 600 basis points over the last year, and that trend is likely to continue.”
Still, he conceded that after recent corrections, a few bright spots are emerging. “We’ve started to look more positively at small and midcaps in building materials, consumer durables, travel and tourism, and auto components. But overall, the segment will still lag largecaps.”
Pharma: Local Over Global
In the pharma sector, Shah struck a cautious note, especially on generic players exposed to the US market.
“We’re not optimistic about anything tied too closely to global growth,” he told ET Now. “Generic pharma is struggling, and speciality business momentum has peaked. We’re more positive on hospitals, which are a domestic growth story.”
Also read: How will new US tariffs affect Indian markets and investor confidence?
The Big Picture
Shah summed it up bluntly: Indian companies are struggling to even match the economy’s own pace of growth.
“For nine consecutive quarters, Nifty companies have grown just 5–8%, below nominal GDP growth,” he reminded ET Now. “In such an environment, investors will have no choice but to pay up for the few sectors that are actually delivering.”