Fundamentals intact but markets search for fresh triggers, says Karthikraj Lakshmanan

Synopsis

Indian equities are navigating uncertainties, with strong fundamentals and a supportive macro environment. Despite a disconnect between on-paper strength and market tickers, experts anticipate double-digit GDP and earnings growth by FY27. Investors are advised to focus on bottom-up stock selection, particularly in financials and select mid-caps, as the market matures.

Indian equities appear to have moved past several key uncertainties — from trade developments to recent earnings — yet the market continues to search for its next catalyst. Speaking to ET Now, Karthikraj Lakshmanan from UTI AMC said the macro backdrop remains supportive, noting that “macros are quite good… Q3 earnings were in line… fundamentals look good,” even though sector-specific corrections have weighed on the index in recent sessions.

He acknowledged the disconnect between positive fundamentals and subdued market performance, as the anchor observed that “on paper everything looks okay… but it is not reflecting on the ticker.” Lakshmanan responded that “flows are difficult to predict… if fundamentals and earnings accelerate, markets will follow,” adding that the environment is increasingly becoming a bottom-up market where stock selection matters more than broad liquidity trends.

Looking ahead, he struck an optimistic tone on growth, pointing out that “FY25–FY26 saw single-digit growth… FY27 could see double-digit GDP and earnings growth,” which he believes should support equities even without major earnings upgrades. On valuations, Lakshmanan said “large caps look more attractive… private banks have reasonable valuations,” highlighting financials as one of the more compelling pockets after recent corrections.

Discussing capital goods, he noted that while “business has done well post-COVID… government capex continues,” valuations in several names remain elevated, making selectivity important for investors. On broader markets, he reiterated that “diversification is a must,” adding that although indices may not show deep cuts, many individual mid- and small-cap stocks have undergone “silent corrections,” creating selective opportunities.

In the consumption space, Lakshmanan said “discretionary and durables have better growth prospects,” while within staples, foods appear structurally stronger. On autos, he observed that “PV growth remains strong… valuations must be watched,” and described the electric vehicle opportunity as evolving gradually rather than offering immediate pure-play opportunities.

Turning to primary markets, he said the “pipeline is strong,” suggesting that muted subscriptions and listings are largely cyclical and reflect market conditions rather than a lack of quality issuers.

Overall, Lakshmanan’s message was clear: while near-term triggers may be elusive, improving growth prospects and steady fundamentals should continue to underpin markets, with disciplined stock selection and valuation awareness remaining key for investors.

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