Trideep Bhattacharya on where he sees value and sectors that may see outperformance in future

The way macroeconomics is shaping up, if you look at the global headwinds, whether it is in terms of the geopolitical tensions or the rising crude, how do you see India vis-à-vis the rest of the world because as far as India is concerned, the good part has been priced in. In the near term, do you see some bit of consolidation happening and going forward, how do you see the Indian markets play out?
Trideep Bhattacharya: There are two or three parts to your question. First of all, amidst global volatility overall, when you look at the maximum amount of volatility or uncertainty, it was the beginning of the year when we did not know how India is going to be affected, what Trump’s plans would have been, and also earnings were weak.

So, from that perspective, at the moment the macros are a little less volatile than where they were and the market rise seems to factor that in. But as you rightly pointed out, the markets have rallied close to September 24 highs and one of our hypotheses on the markets is that earnings-wise we would probably see earnings come back in the second half of FY26. So, over the next few months, markets being very close to September 24 highs, we would expect a bit of time correction in the markets to happen given that markets are in and around fair value.

With regards to India, on a relative basis, we score quite well relative to other emerging market nations and also globally because A) our growth is the strongest and B) the texture of the growth is more domestic dependent than export dependent in circumstances where almost all the global economies are looking to find, to make in their own country a version of whatever goods and services they can and put tariffs on others.

This particular growth metric where growth is driven by domestic earnings scores quite well and hence relatively, we would continue to be favourites of FIIs over a period of time, like we have seen since the beginning of this year.

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In terms of your sector preferences, oil and gas is one space where you are not very bullish in terms of your allocations as well. But oil is the biggest talking point right now with respect to what has been happening with Iran and Israel. Back home in terms of stock preferences, how do you see the space evolving? Yes, oil is giving jitters in the short term. How do you see the movement in the oil impacting various sectors and within the oil and gas space, there are subsegments as well. Are you bullish on any particular theme if at all?
Trideep Bhattacharya: At the end of the day, from the beginning of this year till now, crude oil has come down from $85 to hit a bottom of $65 and now we are hovering between around $70. Net-net, so far, oil has corrected and that is positive for India economy on a net-net basis. Yes, recently we have seen a bit of a spike, but I would call that rise as being more in the range of $65-75 is where I would expect to remain.
On the outside, if it touches or crosses $90 per barrel, I would be worried. But the chances of that happening are fairly limited given that there would be shale gas and also OPEC production coming to rescue. Second, we are a big importer of oil as an economy, and in that context, oil prices going up can cause a little of volatility but as long as it is within the range of $65-75, we do not see it as too much of a concern from a fundamental standpoint.
Third, in the context of where we are placed within oil, we are more positive upstream over the last couple of months since the oil price has corrected quite meaningfully to $65 and that has helped us during this period of oil price rise. But net-net, compared to other sectors, we would bet on that part of the economy which uses oil as an input and churns out output because quite a few of the incentives being doled out either by the macro conditions or by the government act in their favour like consumption. So, we would be betting on the other side. But within oil and gas as a sector, we would rely on stock selection to carry us through.
Talk to us about the other pockets where you see value. The common consensus, of course, is in favour of the financial, especially the NBFC space and as I can see, you are positive on NBFCs as well. But besides that ,talk to us about the sectors where you see value.
Trideep Bhattacharya: If I were to look at two or three things which have happened in the context of India which are genuinely positive and play out over the back half of this year, one is basically a resumption of consumption based recovery and there certainly we do see pockets where a rebound is imminent. Very clearly one is crude oil and we discussed it at length as to the implications of the same. But secondly, inflation as you were talking earlier in the show, has come off quite meaningfully by 100 basis points and more that certainly is a boost for the rural economy. Also, monsoons being 6% higher than long period average also will act as a boom for rural consumption.

Finally, in the budget, the honourable finance minister effectively gave a salary hike of 5% to 7% which will play out this festive season and onwards. Net-net, if you look at all the catalysts that are lined up in front of us, I would say consumption as a sector would see quite a few things going for them as we go toward the second half of FY26.

The second theme that we like in the context of current times is resumption of government spending. Almost one-and-a-half years we spent where hardly any economic decision-making really happened. But since the beginning of this year, we have seen a meaningful amount of contracts being signed and more likely to come through in the areas of infrastructure, defence, railways, and the likes of it, which will play out in the form of earnings as we start from the second half of FY26 onwards. So, these are two themes which would carry on the earnings battle in the second half of FY26 which is what we are positive on. Those would be the sectors that are good to go.

The third area is IT services. It is more tactical in nature, more because expectations are very reasonable at the moment. While earnings will be a little bit languishing, a year from now, earnings outlook will start to look better and macro conditions will ease out. So, these three are the areas that we are betting on in our portfolios.

But other than that, apart from earnings, the other biggest talking point is what will happen to the trade talks and where is India placed with respect to the negotiations that are already underway? Is it time to once again look out for some of those globally linked sectors like pharma, chemical, or some of the other sectors where India has good exposure?
Trideep Bhattacharya: IT services and chemicals would be two such pockets where from a near-term perspective we would be relatively more positive assuming a deal gets done. Now, in all honesty, in what shape and form the deal will get done is unknowable. But what we know is that business conditions tend to take precedence particularly in an economy like that of the US and we would probably have the first contours of a deal as we head towards the first deadline which is July 1st week. Assuming that happens, the two sectors that we like would probably kind of do better than others on a relative basis.

I would also like to point out the other side which is a low probability event, but in case the tariff situation is kind of really the area where US kind of wants to implement high tariffs for the rest of the globe, then the biggest impact would be negatively on United States and globally we would be staring at fairly dire conditions from an economic growth standpoint towards the second half of this year.

However, that is a three-sigma event that is a risk which I do not think at the moment markets are factoring in. At the same time, it is a low probability event and hopefully better sense prevails in the first week of July and that is what we are hoping for. We are bracing up for some sort of volatility in and around that date to see this through.