ETMarkets Smart Talk| Where is the value? Sachin Bajaj favours financials, healthcare, capex plays
Sachin Bajaj, Executive Vice President and Chief Investment Officer at Axis Max Life, believes the market is entering a more favourable phase as the earnings recovery gains traction and FY27 growth visibility improves.
In an interaction with Kshitij Anand of ETMarkets, Bajaj identifies financials, healthcare—particularly CDMOs and hospitals—and capital goods and capex beneficiaries as some of the areas where he continues to find attractive opportunities.
He also sees potential in digital platforms and companies benefiting from manufacturing and supply-chain diversification.
However, Bajaj cautions investors against chasing stocks where valuation multiples have run far ahead of underlying earnings growth.
He also weighs in on the outlook for private capex, the return of foreign investor flows, India’s valuation premium over emerging markets and what the revival in IPO activity signals for the broader market. Edited Excerpts –
Q) Markets have shown signs of stabilisation after posting back-to-back gains of over 1% in June and July. How are you reading the markets?
A) The markets appear to be moving into more favorable phase, with several underlying factors supporting the recent stabilisation.After two consecutive months of gains, we believe the recovery is increasingly being supported by improving fundamentals rather than being purely liquidity-driven.
On the earnings front, we are seeing signs of recovery, with Q1 FY27 earnings growth shaping up better than expectations. More importantly, the visibility of growth for FY27 has improved, providing a stronger fundamental backdrop. High-frequency economic indicators are also pointing towards sustained positive momentum.
From a valuation perspective, markets are currently trading below their long-term averages, which provides comfort despite the recent recovery.
Domestic inflows continue to remain strong and foreign investor flows are showing early signs of turning around. The geopolitical situation, commodity prices and weak monsoon, remains a key source of market volatility in the near-term.
Q) Most of the June quarter results are now out. What is your assessment of the Q1 earnings season and the management commentary?
A) The Q1 FY27 earnings season has been encouraging and, importantly, marks a meaningful improvement in the earnings trajectory.
Nifty earnings appear set for a strong rebound, with June-quarter EPS growth expected to exceed 15%, bringing an end to the prolonged phase of largely single-digit earnings growth.
Corporate commentary has been broadly positive, with companies maintaining a constructive outlook on demand, suggesting that demand and cost pressures have been less disruptive than initially feared.
Q) Private sector capex announcements have remained subdued over the past 12–18 months. If this investment cycle continues to be delayed, could it push back the expected earnings growth for India Inc.? What are your views on the outlook for private capex and its impact on corporate earnings?
A) A sustained revival in private sector capex is critical to maintaining India’s medium-term growth momentum. While private sector capex announcements have been uneven, above-average capacity utilisation levels suggest that the investment cycle is likely to gain momentum over the coming quarters.
Q) FII inflows have remained largely positive so far in August. Can we say that institutional investors are gradually turning positive on India again?
A) July witnessed positive inflow after four consecutive months of outflow. August has also been tending positively. It is early days, to talk about the sustainability of FII flows.
India continues to benefit from strong macroeconomic fundamentals and a resilient domestic growth outlook. Ultimately, flows follow earnings growth. So, if earnings growth is coming back, I would expect flows also to play catch-up.
Q) Following the correction in the first half of 2026, have valuations become more reasonable? If not, can India continue to command a premium over other emerging markets?
A) Valuations of Indian markets at 19.7x FY27E and 17x FY28E are trending below long-term averages. Nifty valuations remain reasonable in the context of earnings growth bouncing back and improving macro stability due to lower crude oil price, though near-term volatility may persist given global uncertainties.
The correction over the last couple of years has made valuations more reasonable. However, India still trades at premium to most emerging markets, which I believe is justified given superior long-term growth prospects.
Q) Are there pockets of froth in the market that investors should avoid?
A) While the broader earnings outlook remains healthy, one needs to distinguish between “expensive but justified” and” expensive with unrealistic expectations”.
As a thumb rule, investors should be cautious, where valuation multiple becomes very high as compared to underlying EBITDA/ earnings growth.
Q) Which sectors continue to offer attractive valuations despite the recent rally?
A) Despite the recent rally, we continue to find attractive opportunities in select pockets of the market. Some of the sectors on our radar include Financials, Healthcare, particularly CDMOs and Hospitals, Capital goods & capex beneficiaries, Digital platforms, and companies benefiting from the manufacturing and supply chain diversification.
Q) How do you view the revival of IPO activity after a few months of subdued issuance?
A) The revival in IPO activity is a constructive signal and signifies maturing of Indian capital markets and availability of ample liquidity. Investors are becoming more valuation conscious now in the primary market.
Further, a healthy IPO pipeline provides access to new business models and new sector investment opportunities.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
