Indian stock market attractive due to strong earnings growth, low leverage, high RoE: Manish Jain of Centrum
Expert view: Manish Jain, the head of fund management at Centrum, believes double-digit earnings growth, low leverage, and high rates make India a fairly attractive investment destination. He recommends sectors like BFSI, hospitality, discretionary consumption, auto and hospitals at this juncture. In an interview with Mint, Jain shared his views on the Indian stock market and the sectors in which he is positive. Here are edited excerpts of the interview:
What is your medium-term view of the Indian market? What are the key headwinds that investors must not ignore?
We are of the view that India continues to remain a fairly strong and stable economy driven by domestic consumption, policy stability, and execution-focused political dispensation. There have been bouts of global geopolitical turmoil in the recent past.
However, India has demonstrated quite often its ability to remain relatively insulated from these factors.
The economy is expected to continue to reap the benefits of policy initiatives, indirect tax reforms, and demographics, and it will become the third-largest economy in the world, creating ample opportunities for investors to continue making money.
Double-digit steady earnings growth, low leverage, and high ROES (return on equities) make India a fairly attractive investment destination.
Having said that, from a medium to long-term perspective, the only couple of red flags that we can envision are: (a) consumption slow-down, which would have a massive ripple-down effect on the whole economy, and (b) private sector capex not picking up in the manner that it should. Else, on a sustainable long-term basis, there seems to be no real danger.
How should investors invest in a volatile market?
The idea is fairly simple – (a) Keep faith in quality. Always look for companies and managements that represent quality, i.e. strong business plans with even stronger execution track records, and (b) buy when everyone is selling.
Our past experience says that tough times are often the best times to buy quality stocks.
We tend to overanalyse the situation and build doomsday scenarios in our heads that often do not turn out to be true. So, the mantra is simple – Keep faith!
Do you see any pockets of opportunity at this juncture?
There are a number of sectors that have been beaten down significantly and are expected to turn in good growth.
They tend to be isolated from global turmoil and have a heavy leaning towards value.
We would advise people to adopt a bottom-up approach at this juncture in sectors like BFSI, hospitality, discretionary consumption, auto and Hospitals.
RBI recently revised India’s GDP growth projection for FY26. Against the backdrop of global turmoil, what is your view on the Indian economy for the current financial year?
There are prevailing issues. However, with the recent correction, markets seem to be pricing them in. We believe that we should be able to clock in at 6 per cent or slightly high GDP growth even in the worst of the scenarios. So, relatively speaking, we seem to be on a strong footing.
What is your outlook for consumption sectors? What stocks are you positive about from this segment?
We believe that both discretionary and staple consumption sectors continue to witness stable demand. The RBI rate cut and the tax sops have definitely helped.
More importantly, rural demand seems to be fairly steady and stable, despite two consecutive normal monsoons.
We remain bullish on discretionary consumption and retail space to play out this theme.
RBI has cut rates by 50 bps this cycle. Do you expect another 75-100 bps cut?
While the stance continues to remain accommodative, it is difficult to predict at this juncture. Given the global turmoil, we sense that RBI will play it by the year in a rapidly developing situation.
What are your expectations from Q4 earnings? Where do you expect some upgrades and downgrades?
Directionally, Q3 had been marginally better than Q2 for non-BFSI companies. We believe that the same trend should ideally continue. Sectors like pharma, discretionary consumption, hotels and hospitals would be the ones to watch out for.
Please suggest some stocks to buy for the next one year.
As mentioned earlier, at this juncture, we continue to recommend sectors like BFSI, hospitality, discretionary consumption, auto and hospitals.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
