Markets Show Potential for Upside Surprise as Top Indian CIOs Adopt Optimistic Outlook

Market Conditions Gradually Turning Favourable for Indian Equities

Indian equities may have already seen the worst of the recent correction, with top fund managers arguing that market conditions are gradually turning favourable after nearly 18 months of consolidation, volatility, and valuation compression.

Speaking at the Moneycontrol DEZERV Wealth Summit in Bengaluru, Harsha Upadhyaya, Harish Krishnan, and Pankaj Tibrewal outlined several reasons why investors should stay constructive on Indian equities despite near-term global uncertainty.

Valuations Have Become More Reasonable

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After a prolonged correction across segments of the market, the panelists said valuation excesses have moderated meaningfully. According to Upadhyaya, there are pockets which are trading at fair or less than long-term average valuations today, pointing to large-cap and mid-cap stocks that corrected sharply during the recent fall. The correction has already reset expectations in several overheated sectors, improving the risk-reward equation for long-term investors.

India Still Looks Under-Owned Relative to Its Economic Strength

Krishnan argued that India's market capitalization still understates the country's growing role in the global economy. According to him, India contributes roughly 4% of global GDP, yet accounts for only around 3% of global market capitalization. This implies that India's long-term equity opportunity remains under-owned relative to its economic trajectory.

Multiple Sectors Are Showing Signs of Revival

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The CIOs also highlighted several sectors where earnings cycles and industry conditions are beginning to improve after prolonged weakness. Tibrewal pointed to chemicals, precision engineering, aerospace-linked auto ancillaries, as emerging structural growth themes. Chemicals, in particular, are beginning to recover after years of pressure from Chinese competition and elevated feedstock costs.

Private Financials Have Seen Meaningful De-Rating

According to the panel, private sector lenders now offer better risk-reward after years of underperformance and valuation compression. Several large private banks that once traded at steep premiums have seen substantial de-rating despite maintaining healthy balance sheets and franchise quality. That could create room for gradual re-rating if credit growth and macro conditions remain supportive.

Investment Strategy Is More Important

Beyond the market outlook itself, the panel said the investment environment is now shifting meaningfully, requiring investors to move away from broad momentum chasing. According to Upadhyaya, markets are transitioning from broad-based rallies toward stock-specific opportunities. The next 12-18 months will lie for real bottom-up stock pickers.

Traditional Valuation Metrics Are Becoming Less Reliable

Upadhyaya also said historical valuation comparisons may increasingly become less useful as digital and platform businesses gain larger representation in benchmark indices. According to him, the inclusion of new-age businesses is distorting traditional metrics such as price-to-earnings ratios, making simplistic historical comparisons less meaningful. That may create opportunities for investors willing to adapt to evolving business models.