India’s domestic growth story intact; bullish on mid and smallcaps despite global uncertainty: Dinshaw Irani

Dinshaw Irani, CEO of Helios Mutual Fund, remains optimistic about Indian equities despite ongoing market corrections, emphasizing that domestic macroeconomic fundamentals are strengthening even as global uncertainty pushes gold prices to $4,800 per ounce.

In an interview with ET Now, Irani characterized the recent market decline as "one-sided" rather than volatile, attributing the pressure primarily to foreign selling and high-net-worth individuals affected by smallcap declines. Crucially, he noted that retail investor sentiment remains firm, with mutual funds sitting on substantial cash reserves.

Mid and smallcaps poised for outperformance

Irani highlighted compelling earnings growth differentials across market capitalizations. The September quarter showed NSE 500 earnings growth of approximately 15%, but the breakdown reveals a stark divergence:

Largecaps (NSE 100): 10% earnings growth
Midcaps (NSE 150): 25-26% earnings growth
Smallcaps (NSE 250): 37% earnings growth

"I do not have any doubts that going into this December quarter which is getting reported now or for that matter the March quarter... the growth will be far more exciting in these two segments than in the largecaps," Irani said, pointing to favorable base effects from weak year-ago comparisons.

Top investment themes for 2026-2027

Domestic consumption takes center stage

Helios Mutual Fund is prioritizing domestic consumption-focused companies over export-driven businesses, citing global uncertainty. Key sectors include:

Financial services:

• Consumer-facing private sector banks
• State Bank of India (disclosed holding)
• NBFCs and auto financiers benefiting from improved liquidity and lower borrowing costs
• Health and life insurance companies
• Wealth managers and asset management companies

Consumer and technology:

• New-age consumer tech platforms with "exponential growth" supporting premium valuations
• Healthcare sector, particularly hospital chains
• Hospitality industry
• High-ticket discretionary spending categories

Metals: A cautious stance

Despite the rally in both precious and base metals like copper, Irani recommends staying away from the metals space. He cited China's strategic capacity withholding as artificially supporting prices, warning that future capacity releases could undermine current momentum. Helios avoids cyclical plays as part of its investment philosophy.

Budget 2026: Potential market catalyst

Irani identified the upcoming budget as unusually significant, calling it more than the typical "non-event exercise." He advocated for two key policy changes:

• Eliminating long-term capital gains tax to stabilize markets, potentially offset by increased STT (Securities Transaction Tax)
• Increased capital expenditure and fixed asset formation spending, even if it means higher fiscal deficits

"This budget is going to be fairly well watched not only by us in India, but also globally," he emphasized.

Global markets: Uncertainty drives safe-haven demand

While acknowledging that gold and silver serve as safe havens during uncertain times, Irani offered a pragmatic take on India's gold wealth effect. He quipped about the difficulty of liquidating household gold holdings, noting "this is purely a wealth effect which is within our hearts and nothing beyond that."

On broader global macros, he pointed to U.S. dollar depreciation benefiting American export competitiveness and debt servicing, while Europe shows steady growth. However, geopolitical uncertainties stemming from U.S. policy statements remain the primary wild card for global markets.

Investment strategy: Focus on improving micros

Beyond favorable macroeconomic trends, Irani highlighted improving microeconomic conditions in India. The combination of fiscal loosening and RBI policy reversals initiated in late 2024 has begun supporting growth, evidenced by the strong September quarter results following several quarters of flat or negative growth.

For investors navigating current volatility, Helios Mutual Fund's strategy centers on structural domestic growth stories with strong earnings visibility, avoiding both export-dependent sectors and cyclical commodity plays while maintaining conviction in mid and smallcap opportunities.