Indian equities: Improve fundamentals, not sentiment, says PL Asset Management

Indian equity investors, frustrated by stagnant returns, are urged by Sandeep Neema of PL Asset Management to distinguish weak sentiment from improving fundamentals. He highlights opportunities in financials, metals, power, and pharma, citing strong earnings visibility and attractive valuations. While cautious on IT, Neema advises topping up equity allocations for long-term gains.

After 12 to 18 months of zero returns in dollar terms and a painful correction in small and midcap stocks, Indian equity investors are frustrated. Sandeep Neema, CIO and Director of Equities at PL Asset Management, has a clear message for them: stop confusing weak sentiment with weak fundamentals.

"The fundamentals are quietly improving," he told ET Now. "Many companies have given above-expected results in Q4. The backdrop is positive for India's corporate sector and investors should start looking at it as an opportunity to invest for the next 12 to 24 months."

Stick to your allocation, but beef up equities

On asset allocation, Neema's advice is measured but direct. Short-term volatility across gold, US bonds, and global equities should not push investors into reckless pivots. Long-term goals should anchor every decision.

That said, he is unambiguous about one thing: if your equity allocation has drifted lower over the past year due to market underperformance, now is the moment to top it up. Indian equities, in his view, are the most attractively placed asset class within any diversified portfolio today.

Financials: The sector with the biggest turnaround potential

After two grinding years of headwinds, sluggish credit growth, RBI rate pressures, and asset quality stress across banks and NBFCs, Neema believes the sector has turned a corner. Credit growth has returned to 13–15%, rate cut cycles appear to be concluding, and net interest margins are set to improve.

Valuations remain attractive relative to historical levels and earnings trajectories. For investors with higher risk appetite, turnaround stories in mid-sized NBFCs and smaller banks offer the maximum earnings delta. For conservative investors, large private sector banks and select PSU banks provide a cleaner, lower-risk entry.

Metals and mining: A structural bull cycle, not a spike

The case for metals is not about short-term commodity price moves, it is structural. Across copper, aluminium, and steel, there has been virtually no meaningful global capacity addition in over a decade. China has wound down excess capacity. Meanwhile, demand is surging: from renewable energy infrastructure, electric vehicles, and global defence and reconstruction spending.

Aluminium is up roughly 30% over the past year. Copper, around 40%. Neema believes there is still significant room to run, and when metal prices move further, the earnings leverage at Indian and global metal companies could amplify stock returns well beyond the commodity price gains.

Power and energy: 3-4 years of earnings visibility

India's power demand continues to outpace supply, and government policy is firmly aligned with renewable energy expansion. Transmission and towers, generation companies, solar players, and power equipment suppliers all carry strong order book visibility extending three to four years out. Elevated valuations in parts of the sector are, in Neema's view, justified by that earnings clarity, and do not represent a reason to stay out.

Pharma: Correction complete, recovery ahead

After two to three years of earnings and valuation pain, Indian pharma is quietly rebuilding. Capacities are in place. FDA compliance issues have largely receded. The sector is now entering what Neema describes as a strong earnings recovery cycle over the next two to three years, with valuations that reflect the past pain rather than the coming opportunity.

One sector to watch, not own yet

On IT, Neema is patient rather than negative. The structural question of how India's technology majors adapt to artificial intelligence remains unanswered. There may be tactical rallies worth playing, but he would rather wait for strategic clarity before taking a structural long position in the sector.