ETMarkets Smart Talk | India’s next growth leaders? Bajaj Alts’ Jitendra Gohil bets on electronics, solar, defence
He also sees opportunities in defence, shipbuilding, infrastructure and aerospace, though he cautions investors about demanding valuations.
By Kshitij Anand, ETMarkets.com |
ETMarkets.com
India’s equity market is entering a phase where stock selection could matter more than broad market trends, with a new set of growth sectors emerging beyond traditional leaders such as FMCG, IT and banking.
Jitendra Gohil, CIO – Listed Equities at Bajaj Alts, believes sectors such as electronics manufacturing, solar energy, power equipment, batteries and waste management are still in the early stages of a strong growth cycle.
He also sees opportunities in defence, shipbuilding, infrastructure and aerospace, though he cautions investors about demanding valuations.
In an interaction with Kshitij Anand of ETMarkets, Gohil also shares his outlook on earnings, FPI flows and the sectors that could lead the next phase of India’s growth. Edited Excerpts –
Q) Thanks for taking the time out. After falling in the 1H2026, Indian market is showing signs of stability. How are your reading into market?
A) India’s macro stability and resilience are underappreciated by the market, in our view. Since the war between Iran and the USA broke out on 28 February 2026, India’s inflation has remained under control, and its 10-year bond yield has risen by only 11 bps so far.
In contrast, 10-year yields in the US, Japan, and Germany have surged by 74 bps, 71 bps, and 54 bps, respectively. This demonstrates India’s resilience and its effective management of the economy in an extremely unstable global environment.
Furthermore, key growth indicators such as credit growth, tax collections, auto sales, retail sales, quick commerce, and exports have shown significant traction.
Therefore, the domestic macroeconomic setup in H2 appears positive, suggesting that Indian equities could perform better than they did in H1.
Q) FPIs are slowly turning around but what would it take for FPIs to return decisively to Indian equities? Is it valuations, earnings, the rupee, or a change in global asset allocation?
A) In our view, the bigger concern for India is geopolitics and the prevailing global narrative. Global capital flows are influenced by politics and momentum, although earnings and valuations remain important.
US policies toward India have so far been harsh, restrictive, and unpredictable, ranging from concerns over purchases of Russian oil and higher tariffs to crackdowns on immigration.
We hope these measures are merely pressure tactics ahead of a trade deal and do not signal a broader shift in relations. In our view, a decisive return of FPI flows to India hinges on the successful conclusion of a trade deal with the USA.
Indian equity valuations are rich, but this has often been the case in the past, given the country’s among the highest ROEs in the world, strong corporate balance sheets, and consistent low- to mid-double-digit earnings growth.
Currency movements remain a concern; however, following the sharp depreciation of the INR, the likelihood of a disorderly devaluation appears low, in our view.
The global AI trade appears to have run ahead of fundamentals, and therefore FPIs may increasingly take note of India’s resilience and strong long-term fundamentals.
Read more: ETMarkets NRI Talk | GIFT City AIFs could be the next big NRI investment destination: LGT Wealth’s Nikhil Advani
Q) Household debt has been rising, and recent figures suggest that it has risen to around 48% of GDP from about 35% a decade ago. Should investors be concerned that consumption has become increasingly credit-dependent?
A) Rising household debt-to-GDP is inevitable as India formalizes, urbanizes, and access to the banking system expands. Data-driven risk management practices are enabling greater scale and faster turnaround times in lending.
Compared with other Asian economies, India’s household debt-to-GDP ratio remains significantly lower. Household debt-to-GDP stands at approximately 89% in South Korea, 88% in Thailand, 70% in Malaysia, and 58% in China.
There are several structural factors driving the rise in household leverage. First, India’s total fertility rate (TFR) has declined sharply over the past decade and currently stands at around 1.9.
Shrinking family sizes tend to encourage higher consumption relative to savings. Second, nearly 65% of India’s 1.4 billion population is below the age of 35. Younger generations are generally more inclined toward spending and instant gratification.
However, we do not believe this poses any systemic risk to the economy, as banking system NPAs are near multi-decade lows.
Third, the wealth effect resulting from the significant appreciation in gold prices and equity markets over the past five years has supported household borrowing.
Gold loan growth in the banking system growing over 50% YoY with outstanding gold loans to nearly INR 18 to19 trillion i.e. about 5% of GDP.
Lastly, direct benefit transfers under central and state government schemes may also be supporting household budgets to some extent.
Currently, around 800 million people are covered under food subsidy programs, while income support for women through various central and state schemes is estimated to exceed INR 2.6 trillion annually.
Q) With valuations having moderated but still not looking outright cheap, should investors expect the next phase of returns to come more from earnings growth than from valuation re-rating?
A) The standard textbook answer is that valuations expand when earnings growth accelerates. However, this has not always been the case. There have been periods when earnings growth was weak, yet equities traded at record valuations, and vice versa.
Moreover, the valuation and earnings growth argument is becoming less compelling, as several loss-making or barely profitable companies are now part of the listed universe. This phenomenon is not unique to India; it is evident in other markets as well.
In our view, this is a stock picker’s market. Investors should carefully evaluate management quality, distinguish narrative from reality, and assess long-term growth prospects before relying solely on valuation-versus-earnings arguments.
The market is increasingly rewarding companies that possess a sustainable right to win over the long term, even if their near-term cash flows and earnings remain weak.
Read more: ETMarkets Smart Talk | How to invest ₹1 crore in bonds for 3 years: Vineet Agarwal’s playbook
Q) How are you assessing the earnings outlook for India post Q1 numbers? Are we finally at a point where earnings upgrades can become a meaningful market catalyst?
A) I think so, yes. Earnings growth could be revised upward in the near term. However, here is the catch: private capex is finally picking up pace, which is a positive sign for economic growth. At the same time, though, it can lead to weaker cash flows and margin pressure in the near term.
This, coupled with heightened competition, could weigh on profit growth. Therefore, I am more bullish on the economic growth outlook while remaining somewhat cautious on the earnings growth narrative
Q) India continues to command a premium over several emerging markets. How much of that premium is justified by India’s growth prospects, and where do you think the market is still pricing in too much optimism?
A) Optimism about India is warranted over the long term. The situation appears more challenging in many other parts of the world.
In the US, the top 10% of the population owns approximately 87% of the stock market, while the University of Michigan Consumer Sentiment Index remains below levels seen during both the COVID-19 pandemic and the Global Financial Crisis, even as the S&P 500 trades near all-time highs.
In Europe, the ongoing conflict has eroded business and consumer confidence, while population growth has largely stagnated. China, meanwhile, continues to struggle with weak domestic consumption.
The AI-led rally has benefited a select group of companies; however, generating adequate returns on these investments in an environment of rising bond yields may prove challenging. Hence, I believe, India’s PE premium is justified as it offers a very diversified and solid long term growth story.
Q) Which sectors do you believe can deliver earnings growth above the broader market over the next 2-3 years?
A) It is an exciting time for fund managers, as India is transitioning away from its traditional market leaders such as FMCG, IT, and banking toward a new set of growth sectors. Several emerging sectors are gaining prominence, and their profit growth has been exponential.
Consider electronics manufacturing, solar energy, power equipment, batteries, and waste management, where growth remains robust and, in our view, this is only the beginning.
Defence, shipbuilding, energy, infra and aerospace are among the newer opportunities where growth could significantly exceed expectations. IPOs are providing investors with opportunities to participate in these emerging sectors and companies.
However, investors should exercise caution, as valuations are generally demanding for many of these businesses.
Q) Do you see a rotation from expensive growth stocks towards more reasonably valued large caps as the dominant market theme?
A) Once FPIs return, there could be a brief period during which mid- and small-cap stocks underperform due to profit-taking. Liquidity may shift toward large-cap stocks that appear undervalued, such as private sector banks and IT companies.
Consumer discretionary companies could also start performing better ahead of the festive season, the Uttar Pradesh elections, and the implementation of the 8th Pay Commission.
Hence, growth is expected to be broad-based over the next 12 to 18 months. If India is able to successfully conclude a trade deal with the USA, the export sector could also begin to gain momentum.
Q) Mid- and small-caps have delivered strong returns over the longer term. How concerned are you about pockets of excess valuation and liquidity risk in this segment?
A) Yes, valuations are a concern in certain sectors, and investors should exercise extreme caution when pursuing growth stocks. Particular attention should be paid to instances where insiders are reducing their holdings or where management teams are providing aggressive growth guidance.
Careful evaluation is critical, as the market is currently experiencing significant euphoria around growth stocks, which may result in mispricing and excessive valuation multiples.
Disclaimer:
The document is neither a general offer nor solicitation to avail the service of investment from the SEBI Registered Intermediary and the views expressed in this document are author’s personal views and are not under the services offered by Bajaj Alts nor is it an offer to sell or a generally solicit an offer to become an investor in the services offered by the Bajaj Alts. The information contained in this document does not constitute a professional advice/assurance and no person should act upon any information contained herein without obtaining professional advice. Each reader of this document agrees to the foregoing.
SEBI PMS Registration number: INP000009904.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Jitendra Gohil, CIO – Listed Equities at Bajaj Alts, believes sectors such as electronics manufacturing, solar energy, power equipment, batteries and waste management are still in the early stages of a strong growth cycle.
He also sees opportunities in defence, shipbuilding, infrastructure and aerospace, though he cautions investors about demanding valuations.
In an interaction with Kshitij Anand of ETMarkets, Gohil also shares his outlook on earnings, FPI flows and the sectors that could lead the next phase of India’s growth. Edited Excerpts –
Q) Thanks for taking the time out. After falling in the 1H2026, Indian market is showing signs of stability. How are your reading into market?
A) India’s macro stability and resilience are underappreciated by the market, in our view. Since the war between Iran and the USA broke out on 28 February 2026, India’s inflation has remained under control, and its 10-year bond yield has risen by only 11 bps so far.
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In contrast, 10-year yields in the US, Japan, and Germany have surged by 74 bps, 71 bps, and 54 bps, respectively. This demonstrates India’s resilience and its effective management of the economy in an extremely unstable global environment.
Furthermore, key growth indicators such as credit growth, tax collections, auto sales, retail sales, quick commerce, and exports have shown significant traction.
Therefore, the domestic macroeconomic setup in H2 appears positive, suggesting that Indian equities could perform better than they did in H1.
Q) FPIs are slowly turning around but what would it take for FPIs to return decisively to Indian equities? Is it valuations, earnings, the rupee, or a change in global asset allocation?
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A) In our view, the bigger concern for India is geopolitics and the prevailing global narrative. Global capital flows are influenced by politics and momentum, although earnings and valuations remain important.
US policies toward India have so far been harsh, restrictive, and unpredictable, ranging from concerns over purchases of Russian oil and higher tariffs to crackdowns on immigration.
ADVERTISEMENT
We hope these measures are merely pressure tactics ahead of a trade deal and do not signal a broader shift in relations. In our view, a decisive return of FPI flows to India hinges on the successful conclusion of a trade deal with the USA.
Indian equity valuations are rich, but this has often been the case in the past, given the country’s among the highest ROEs in the world, strong corporate balance sheets, and consistent low- to mid-double-digit earnings growth.
Currency movements remain a concern; however, following the sharp depreciation of the INR, the likelihood of a disorderly devaluation appears low, in our view.
The global AI trade appears to have run ahead of fundamentals, and therefore FPIs may increasingly take note of India’s resilience and strong long-term fundamentals.
Read more: ETMarkets NRI Talk | GIFT City AIFs could be the next big NRI investment destination: LGT Wealth’s Nikhil Advani
Q) Household debt has been rising, and recent figures suggest that it has risen to around 48% of GDP from about 35% a decade ago. Should investors be concerned that consumption has become increasingly credit-dependent?
A) Rising household debt-to-GDP is inevitable as India formalizes, urbanizes, and access to the banking system expands. Data-driven risk management practices are enabling greater scale and faster turnaround times in lending.
Compared with other Asian economies, India’s household debt-to-GDP ratio remains significantly lower. Household debt-to-GDP stands at approximately 89% in South Korea, 88% in Thailand, 70% in Malaysia, and 58% in China.
There are several structural factors driving the rise in household leverage. First, India’s total fertility rate (TFR) has declined sharply over the past decade and currently stands at around 1.9.
Shrinking family sizes tend to encourage higher consumption relative to savings. Second, nearly 65% of India’s 1.4 billion population is below the age of 35. Younger generations are generally more inclined toward spending and instant gratification.
However, we do not believe this poses any systemic risk to the economy, as banking system NPAs are near multi-decade lows.
Third, the wealth effect resulting from the significant appreciation in gold prices and equity markets over the past five years has supported household borrowing.
Gold loan growth in the banking system growing over 50% YoY with outstanding gold loans to nearly INR 18 to19 trillion i.e. about 5% of GDP.
Lastly, direct benefit transfers under central and state government schemes may also be supporting household budgets to some extent.
Currently, around 800 million people are covered under food subsidy programs, while income support for women through various central and state schemes is estimated to exceed INR 2.6 trillion annually.
Q) With valuations having moderated but still not looking outright cheap, should investors expect the next phase of returns to come more from earnings growth than from valuation re-rating?
A) The standard textbook answer is that valuations expand when earnings growth accelerates. However, this has not always been the case. There have been periods when earnings growth was weak, yet equities traded at record valuations, and vice versa.
Moreover, the valuation and earnings growth argument is becoming less compelling, as several loss-making or barely profitable companies are now part of the listed universe. This phenomenon is not unique to India; it is evident in other markets as well.
In our view, this is a stock picker’s market. Investors should carefully evaluate management quality, distinguish narrative from reality, and assess long-term growth prospects before relying solely on valuation-versus-earnings arguments.
The market is increasingly rewarding companies that possess a sustainable right to win over the long term, even if their near-term cash flows and earnings remain weak.
Read more: ETMarkets Smart Talk | How to invest ₹1 crore in bonds for 3 years: Vineet Agarwal’s playbook
Q) How are you assessing the earnings outlook for India post Q1 numbers? Are we finally at a point where earnings upgrades can become a meaningful market catalyst?
A) I think so, yes. Earnings growth could be revised upward in the near term. However, here is the catch: private capex is finally picking up pace, which is a positive sign for economic growth. At the same time, though, it can lead to weaker cash flows and margin pressure in the near term.
This, coupled with heightened competition, could weigh on profit growth. Therefore, I am more bullish on the economic growth outlook while remaining somewhat cautious on the earnings growth narrative
Q) India continues to command a premium over several emerging markets. How much of that premium is justified by India’s growth prospects, and where do you think the market is still pricing in too much optimism?
A) Optimism about India is warranted over the long term. The situation appears more challenging in many other parts of the world.
In the US, the top 10% of the population owns approximately 87% of the stock market, while the University of Michigan Consumer Sentiment Index remains below levels seen during both the COVID-19 pandemic and the Global Financial Crisis, even as the S&P 500 trades near all-time highs.
In Europe, the ongoing conflict has eroded business and consumer confidence, while population growth has largely stagnated. China, meanwhile, continues to struggle with weak domestic consumption.
The AI-led rally has benefited a select group of companies; however, generating adequate returns on these investments in an environment of rising bond yields may prove challenging. Hence, I believe, India’s PE premium is justified as it offers a very diversified and solid long term growth story.
Q) Which sectors do you believe can deliver earnings growth above the broader market over the next 2-3 years?
A) It is an exciting time for fund managers, as India is transitioning away from its traditional market leaders such as FMCG, IT, and banking toward a new set of growth sectors. Several emerging sectors are gaining prominence, and their profit growth has been exponential.
Consider electronics manufacturing, solar energy, power equipment, batteries, and waste management, where growth remains robust and, in our view, this is only the beginning.
Defence, shipbuilding, energy, infra and aerospace are among the newer opportunities where growth could significantly exceed expectations. IPOs are providing investors with opportunities to participate in these emerging sectors and companies.
However, investors should exercise caution, as valuations are generally demanding for many of these businesses.
Q) Do you see a rotation from expensive growth stocks towards more reasonably valued large caps as the dominant market theme?
A) Once FPIs return, there could be a brief period during which mid- and small-cap stocks underperform due to profit-taking. Liquidity may shift toward large-cap stocks that appear undervalued, such as private sector banks and IT companies.
Consumer discretionary companies could also start performing better ahead of the festive season, the Uttar Pradesh elections, and the implementation of the 8th Pay Commission.
Hence, growth is expected to be broad-based over the next 12 to 18 months. If India is able to successfully conclude a trade deal with the USA, the export sector could also begin to gain momentum.
Q) Mid- and small-caps have delivered strong returns over the longer term. How concerned are you about pockets of excess valuation and liquidity risk in this segment?
A) Yes, valuations are a concern in certain sectors, and investors should exercise extreme caution when pursuing growth stocks. Particular attention should be paid to instances where insiders are reducing their holdings or where management teams are providing aggressive growth guidance.
Careful evaluation is critical, as the market is currently experiencing significant euphoria around growth stocks, which may result in mispricing and excessive valuation multiples.
Disclaimer:
The document is neither a general offer nor solicitation to avail the service of investment from the SEBI Registered Intermediary and the views expressed in this document are author’s personal views and are not under the services offered by Bajaj Alts nor is it an offer to sell or a generally solicit an offer to become an investor in the services offered by the Bajaj Alts. The information contained in this document does not constitute a professional advice/assurance and no person should act upon any information contained herein without obtaining professional advice. Each reader of this document agrees to the foregoing.
SEBI PMS Registration number: INP000009904.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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