Bajaj Finserv AMC sees earnings lift for Indian stocks

After two quiet years, Indian stocks are again asking investors a familiar question: will patience finally pay?

Sorbh Gupta, head of equity at Bajaj Finserv Asset Management, believes the setup has improved for Indian equities. His argument is simple. Earnings may recover, valuations have cooled, and global investors may soon look beyond the AI trade.

For a retail investor with SIPs running every month, this matters. The question is no longer whether markets look exciting today. It is whether the next one or two years reward those who stayed boring.

Why Indian stocks may recover

Indian equities have lagged both emerging and developed markets for more than two years. That sounds technical, but the effect is familiar. Portfolios moved, but not enough to make investors feel richer.

Gupta says the tide may now turn because corporate earnings are showing early signs of recovery. If companies sell more, earn better margins, and report stronger profits, share prices usually notice with a lag.

The other big shift sits outside India. Global investors spent the past few years chasing AI-linked stocks. Many of those stocks ran up sharply. Gupta expects some cooling there, which could push money back toward markets with steadier earnings.

India also benefits when oil and geopolitical pressure ease. A calmer Middle East helps India because the country imports a large share of its crude oil. Lower pressure on oil helps the rupee, inflation, and the current account.

The RBI has also taken a more supportive monetary stance, while the government has eased tax pressure on foreign debt flows. Put simply, India looks less vulnerable to global money moving out suddenly.

Retail investors face timing trap

The hardest thing for ordinary investors is not finding a perfect stock. It is staying invested when nothing exciting happens.

Gupta’s message to retail investors is clear: do not spend too much time waiting for the perfect entry point. Markets rarely send a polite invitation before they move.

He says valuations have corrected after around 18 months of sideways movement. In plain English, stock prices have had time to digest earlier excitement. That makes the market less frothy than it looked earlier.

For SIP investors, the answer is still discipline. A monthly investment works because it buys across good, bad, and dull markets. It does not require heroic market timing.

For lump-sum investors, Gupta suggests using a three-month systematic transfer plan. That means parking money first, then moving it into equities in parts. It reduces the anxiety of investing everything on one unlucky day.

This is useful for families sitting on bonus money, property sale proceeds, or maturing fixed deposits. A phased entry may not maximise returns every time, but it makes behaviour easier. In investing, behaviour often matters more than brilliance.

Domestic money holds the line

One of the biggest changes in Indian markets is the rise of domestic money. Domestic institutional investors, especially mutual funds, have kept buying even when foreign portfolio investors sold aggressively.

This is not a small shift. Earlier, Indian markets often panicked when foreign investors sold. Today, SIP money from salaried households gives the market a stronger local base.

Gupta expects domestic inflows to remain steady through SIPs and lump-sum investments. That means Indian markets may not depend as heavily on foreign investors as they once did.

Foreign portfolio investors could also return if earnings improve and valuations look more sensible. Global funds usually care about three things: growth, price, and currency risk. India may be improving on all three.

The risk, of course, is that foreign money can change direction fast. A spike in oil, a stronger dollar, or a global scare can quickly hit flows. Retail investors should not mistake calmer markets for risk-free markets.

A slightly weak monsoon also needs watching. It can affect rural demand, food prices, and inflation. Gupta does not see it as a major equity risk right now, but India knows better than to ignore the rains.

Where the opportunity sits

Gupta sees comfort in large-cap valuations, especially after their recent underperformance. Large private sector banks stand out in his view because they have lagged for years and now look more reasonably priced.

That is important for investors who want quality without chasing the hottest story. Banks sit at the heart of the economy. If credit demand improves and asset quality stays healthy, they can deliver steady gains.

He also sees opportunities in mid-cap and small-cap stocks. But this is where investors must be careful. Not every small company is cheap just because it has fallen. Not every rising stock deserves fresh money.

For most retail investors, diversified small-cap or flexi-cap funds may be safer than picking names blindly. These funds allow professional managers to choose across company sizes. That matters when valuations differ widely.

Pharma, healthcare, and wellness also look like long-term themes. India is getting more health-conscious, medical spending is rising, and demographics support demand. This is not a one-quarter story.

Still, investors should remember one basic rule. A good sector can contain bad stocks. A strong theme can become dangerous if bought at any price.

AI hype meets market reality

AI remains one of the most powerful business stories globally. Gupta does not dismiss it. He says AI will shape companies, industries, and the wider economy over the medium to long term.

But markets have already priced in a lot of that hope. Some global AI-linked companies now trade at valuations that may have run ahead of earnings. That is where caution enters.

Indian investors should understand the difference between a great technology and a great investment. The first can change the economy. The second still depends on price, profits, and patience.

This matters because every bull market finds a shiny label. Today it is AI. Yesterday it was another theme. Tomorrow it will be something else.

The sensible approach is not to run away from AI, but to keep return expectations realistic. Investors who chase every hot theme often enter late and exit hurt.

For Indian equities, the next phase may be less about slogans and more about earnings. That is healthier. If companies deliver profits, markets have something real to work with.

The real test now is not whether the Bombay Stock Exchange’s Sensex or National Stock Exchange’s Nifty 50 jumps next week. It is whether households can stay invested long enough for earnings to catch up. For ordinary investors, the smartest move may still be the least dramatic one: keep investing, stay diversified, and stop treating every market wobble like a verdict.