India poised for next phase of outperformance as FIIs rebalance: Sachin Shah

India’s equity markets may be headed for a stronger second leg of outperformance as global investors reassess emerging markets amid a softening US tech rally, says Sachin Shah, Whole Time Director & Fund Manager at Emkay Investment Managers.

Speaking to ET Now, Shah said India’s recent underperformance must be viewed in context: after a standout 2023, the current year is more of a consolidation phase. Meanwhile, the surge in IPO activity has expanded total market capitalisation even as secondary market movements remain relatively muted.

Earnings season much better than feared

Shah highlighted that the Q2 earnings season surprised positively. “It has been much better than anticipated or feared,” he said. With GST cuts and a favourable monsoon, management commentary across sectors points to a stronger second half.

Autos, private banks and IT remain top overweights

Emkay continues to hold a bullish stance on:

Autos: Strong festive retail demand in both two- and four-wheelers has validated their overweight call.

Private banks: Sector leaders have delivered robust results and continue to trade at attractive valuations.

IT services: A contrarian overweight stance over the past 12–18 months has turned rewarding. Shah expects 12–24 months of steady momentum driven by cloud migration and AI-enablement projects across Fortune 500 companies, supported by healthy order books and favourable risk-reward profiles.

Consumption: A mixed bag post GST cuts

While auto valuations were compelling pre–GST rationalisation, broader consumption plays require selectivity. Certain pockets such as paint companies have turned reasonably valued and reacted positively to improved earnings, but Shah notes that this trend is not uniform across all discretionary names.

Primary market: Emkay sticks to ‘three-quarter rule

Despite a flood of IPOs, Emkay remains patient. Shah said they typically wait 3–4 quarters post listing before investing, allowing real performance trends to emerge.
Examples include:

Delhivery, added 18–24 months after listing

Zomato (Eternal), bought only after 12–18 months of track record
“We like to see how companies perform after listing before committing capital,” he added.