Sharing his perspective on ET Now, Christy Mathai, Fund Manager-Equities, Quantum AMC pointed out that earnings expectations remain a key anchor for optimism. “So, clearly when we look at some of the numbers which are coming, let us say, in terms of earnings, broadly looks like it is a consensus bet that the earnings sort of will improve going into the next f fiscal year,” he said.
A significant portion of index earnings is driven by financials, particularly banks, which are expected to benefit as interest rates turn from a headwind into a tailwind following cumulative repo rate cuts.
However, Mathai also highlighted a structural shift in global capital flows. Compared with a few years ago, foreign institutional investors now have multiple emerging market options offering comparable or even better earnings visibility.
“The marginal buyer who could take the market higher which is the FIIs in that sense, they have the ability to pick and choose which was not the case few years back and hence you are seeing some bit of selling that is in the market,” he noted.
Despite this, his outlook on select opportunities remains constructive. According to him, while index-level movements may appear subdued, several stocks have corrected meaningfully, opening up room for selective buying.
“From our lens, when we look at our portfolio companies especially given the correction or consolidation that we have had in the past, we remain optimist and we are able to find new ideas,” he said, adding that portfolio cash levels have come down as opportunities have emerged. Largecaps preferred, select midcaps back on radar
On portfolio positioning, liquidity continues to be a key filter, keeping the bias tilted towards largecaps. That said, the recent correction has made certain midcap names attractive once again. “So, we tend to be more towards the largecap, but of late some of these stocks from the midcap range… is also coming given the correction,” Mathai explained.
He cited additions in logistics, particularly a cash management logistics player linked to ATM operations, along with selective exposure to pharma where near-term concerns may be overstated. Core allocations in banking, IT services and autos continue to remain the mainstay.
IT Services: Staying the Course Amid AI Noise
Volatility in the rupee and the debate around an AI-led valuation bubble in the US have raised questions around Indian IT services. Mathai, however, maintained a steady stance. “So, our positioning continues to be the same. If not, we would have increased our allocation in this fall that we have had some time back,” she said.
He pointed out that while hardware spends have been visible in US corporate numbers, services spending has lagged for nearly three to four years. There is an expectation that some of this capex will eventually translate into services demand.
On AI, she struck a balanced note, saying deal wins are still small and pricing pressures persist, but workforce retraining could help absorb the impact. Currency depreciation, he added, has begun to aid margins, offering incremental support.
Flows Remain the Big Question
Looking ahead, flows remain the biggest uncertainty. Domestic inflows are strong but are being absorbed by a steady pipeline of IPOs. On the FII front, the picture is less clear. “It is a matter of fact what happens to FII where I think is a bit challenged because you have optionalities, various options when you look at the other countries as well,” Mathai said, pointing to markets like Korea and Taiwan that are offering comparable growth prospects.
