Indian Equities Poised for Rebound Amid Attractive Valuations, Currency Stability: Deepak Gupta

Indian equities are showing signs of a potential rebound, with attractive valuations and improved currency stability, according to Deepak Gupta of JM Financial Asset Management. Sectors like manufacturing and healthcare are highlighted as promising, while caution is advised for oil & gas and IT services. Financials are seen in a 'sweet spot', and while EVs are inevitable, traditional automakers are not to be dismissed.

After two years of lagging global markets, Indian equities may be poised for a turnaround as valuations turn attractive and currency stability improves, according to Deepak Gupta, Senior Fund Manager and Head of Research at JM Financial Asset Management.

Valuation gap creates opportunity

Speaking to ET Now, Gupta noted that Indian indices have delivered only low-to-mid single-digit CAGR returns over the past two years, while developed market peers have posted mid-teen growth, leaving Indian valuations far more palatable than they were two years ago. He pointed to the Reserve Bank of India's efforts to stabilise currency volatility, particularly through the recently announced FCNR deposit scheme, as a key positive catalyst. Drawing a parallel to 2013, when a similar exercise proved highly successful, Gupta believes currency stabilisation could meaningfully slow the persistent FII selling that has weighed on Indian markets over the past year and a half.

Manufacturing and healthcare lead sector picks

Gupta is most constructive on manufacturing-linked sectors, including capital goods, infrastructure, and utilities, citing the government's push toward self-reliance amid ongoing global geopolitical instability. He also remains bullish on healthcare, which benefits from rupee depreciation tailwinds and consistent, recession-resistant demand for pharmaceuticals and premium healthcare services.

On the cautious side, Gupta flagged oil and gas as a sector to avoid given unpredictable crude price movements tied to the ongoing West Asia crisis. He also remains wary of IT services, which continue facing headwinds as artificial intelligence reshapes investor expectations around the sector's growth trajectory.

IT sector: Valuation comfort, but growth must follow

Gupta clarified that his concerns around IT relate to cash flow utilisation rather than terminal value erosion. He noted growing acquisition activity among Indian IT firms as a healthy sign, though he believes the sector's weak product business remains a work in progress. While IT stocks trade near decadal-low valuations, Gupta cautioned that sustained outperformance requires earnings growth to exceed nominal GDP growth, a milestone he expects will take more time to materialise.

Live Events

You Might Also Like:

HDFC Bank valuations attractive, banking sector ready for next growth phase: Sandip Sabharwal

Financials in a "sweet spot"

Gupta described lending financials as currently in a sweet spot, supported by stable asset quality and improving conditions even within the microfinance segment. He expects FCNR deposit inflows to aid net interest margins by reducing regulatory cost burders like CRR and SLR. While rising competitive intensity, especially from digitally upgraded PSU banks, has compressed valuations, Gupta believes well-moated lenders growing faster than nominal GDP will eventually regain investor favour. Non-lending financial businesses, including asset management and broking, continue to benefit from expanding capital markets.

EVs, consumption, and durables

On electric vehicles, Gupta acknowledged the theme's inevitability but cautioned against writing off traditional ICE automakers, noting India's EV infrastructure remains underdeveloped and many legacy manufacturers are already restructuring to capture EV market share.

Within consumption, Gupta highlighted strong, inelastic demand in the premium segment, driven by rising aspirations despite India's relatively modest per capita income. He also flagged consumer durables, particularly air conditioning makers, as direct beneficiaries of this year's intense heatwave, alongside structural tailwinds from expanding real estate development.

Utilities: Thermal over renewables for now

On power, Gupta expressed optimism around thermal utilities, arguing they remain the most reliable source of power amid rising consumption, while battery energy storage technology needed to scale renewables remains in its infancy in India. He expects renewables to perform reasonably well over the next three years, but views energy storage as the critical missing link for the segment's long-term growth.

You Might Also Like:

Beyond the Nifty slump: Sandeep Bagla on why largecap valuations are ripe for comeback in 2026

(You can now subscribe to our ETMarkets WhatsApp channel)

(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

...moreless

NSE, Jio mega IPOs: Why size doesn’t matter, valuations do

NSE IPO: Will Chauhan’s homecoming end in fireworks this Diwali?

Indian economy: The confluence case

She made baking an INR2k crore biz. Now comes the real heat.

Crude falls, retail prices don’t. Will it be different this time?

Stock Radar: Star Health stock breaks out from multi-year resistance band to hit fresh 52-week high in June; time to buy?

1

2

3