Market outlook: The market has largely digested the current information about the US trade deal. Investors are now waiting for this formal signing. Although a final deal could act as a fresh trigger for the market, any delay beyond the March 2026 timeline could spoil the market mood. These things were said by Rahul Bhuskute, Chief Investment Officer of Bharti AXA Life Insurance in a conversation with Moneycontrol.
He believes that in the current situation, PSU stocks with good prospects like Defence, PSU Bank, Power Utility and Metal are looking good. In the third quarter, small-medium companies have left large-cap companies behind in terms of earnings. He believes that for value investors, the dividend yield offered by large-cap IT companies also looks attractive.
Do you think small and mid-cap companies have presented better results than large cap companies in Q3?
Overall, it seems that small- and mid-cap companies have outperformed large-cap companies in terms of earnings in Q3. However, this difference in performance largely depends on the composition of the sector. There is a high concentration of mid/small cap space in sectors with high EPS growth in Q3 such as capital goods, construction materials, metals and mining.
In contrast, the large-cap indices are more tilted towards private banks and IT, which have seen below-average growth recently. Looking at all sectors from a general perspective, earnings growth across market caps appears to be similar.
Do you think Q4 numbers will be much better than Q3 after reading the management commentary?
Generally, corporate management sentiment has been better in Q3 than in previous periods. This hope has arisen due to many positive factors. Implementation of GST reforms, successful landmark trade deals with the EU and good interest rate environment have boosted sentiment.
Additionally, the strong capex outlay of Rs 12.2 lakh crore in the Union Budget and improved credit growth have boosted confidence from a longer-term perspective. Strategic international changes, especially China’s gradual withdrawal of export rebates on some products, are also improving the competitive environment for Indian businesses.
However, looking at these structural tailwinds, it seems that no big increase in Q4 earnings is expected. But this has become a strong base for FY27. It is generally believed that Nifty 50 may see a growth of 8-9% in FY26. This means that Q4 EPS growth of more than 5-6% should not be a difficult task.
Given the growth potential and challenges posed by AI, is it better to have mid-cap IT stocks in the portfolio rather than large-cap stocks?
For growth-loving investors, mid-cap IT companies have generally been more attractive than large-cap companies. This is not only because they have a smaller base, but also because they are more agile and run lean operations by specializing in certain domains and taking decisions in less time. Additionally, some of these companies have already shifted from a traditional service-based model to a platform-led approach, leading to stronger and more consistent growth in recent quarters.
Additionally, the deal win momentum of these companies remains strong, indicating strong double-digit growth in FY27. While their large-cap counterparts are projected to see high single-digit growth. However, for value investors, the dividend yields offered by large-cap IT companies may look attractive.
Don’t you see a huge rise in gold and silver from here?
The recent rise in gold and silver has come due to several structural reasons. Factors like heavy purchases by central banks, geopolitical hedging and low real rates in the US are included in this. Additionally, the growing de-dollarization narrative (increased by the US’s high fiscal deficit and the alleged “politicization” of the Federal Reserve) has strengthened demand.
However, it is difficult to predict how long such top-down trades will last. But these persistent tailwinds are likely to create more volatility. Given their important role as an inflation hedge, we recommend maintaining a strategic allocation to precious metals (especially gold) in a diversified portfolio.
Do you think it is better to take a bullish view on PSU stocks given the expected increase in dividends and capex?
Investing in PSUs requires careful consideration due to government policy risks and stock overhang related to disinvestment. However, we also believe that some strong and well-functioning PSUs are the vehicle for carrying out major reforms of the government and hence have been good wealth generators for some time. Among PSU stocks with good prospects, stocks like Defence, PSU Bank, Power Utility and Metal are looking good.
Stock market news: Strong action was seen in these stocks amid the news of block deal, do you have any of these?
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