Kotak expects Nifty earnings growth at 8.5–9% this year. Gupta said this does not justify current market levels. “The Nifty is still trading at about 21.5 times 2026-27 (FY27) earnings, which is still expensive,” he said. He added that India still trades at a 60% premium to the MSCI Emerging Markets Index even after underperforming other markets in the past year.
Foreign Portfolio Investors (FPIs) continue to pull out funds, as markets with stronger AI-linked opportunities such as Korea, Taiwan, Brazil and Mexico have seen higher gains. “We’re really standing out not just in terms of the absolute performance in local currency terms, but also the rupee,” Gupta said.
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The weaker rupee has also reduced foreign returns. With the currency down nearly 5% this year, the Nifty’s 10% rise converts into only about 5% in dollar terms. In comparison, the MSCI Emerging Markets Index has gained around 24–25%, while Korea has risen about 70%. Concerns that the currency may be used to support growth are also keeping investors cautious.
Gupta said this environment calls for a defensive stance. “This is a time when you sort of have to protect your capital, not worry about the return on capital as much,” he said. He prefers domestic-focused sectors over IT services, global pharma and auto ancillaries that rely on overseas demand.
Within domestic themes, he sees opportunities in select large-cap banks, non-banking financial companies (NBFCs), aviation names such as IndiGo, hotels, telecom and domestic-focused pharmaceuticals. He said larger firms may handle slow growth better than smaller peers.
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Gupta remains cautious on auto demand. The boost from goods and services tax (GST) cuts is fading and consumption is yet to pick up. “Auto demand is going to be a function of the overall consumption growth in the economy, which is still very weak,” he said. Among automakers, M&M is Kotak’s preferred pick, while exposure to US-dependent auto ancillaries should be limited due to global uncertainty.
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