By Nikhil Agarwal

Copyright indiatimes

AgenciesMidcaps are in position to take benefits of cyclical recovery; hence we are expecting the trend of midcaps to have potential of delivering better numbers to continue in the foreseeable future.

Gold and silver have dazzled investors, but is it time for equities to shine again? Union AMC’s Head of Equity Sanjay Bembalkar breaks down the tug of war between precious metals and the Nifty, shares his outlook for FY26, and reveals the sectors he believes could lead India’s next market rally.Edited excerpts from a chat:Multi-asset allocation funds have grown in popularity due to the rise of gold and silver. What would be your advice for investors looking to understand whether they should invest in gold-silver ETFs or leave the asset allocation job via a multi-asset allocation fund?Multi-asset allocation funds are funds which allocate across various asset classes like equity, debt and precious metals like gold or silver. Multi-asset allocation funds are designed to capture negative correlation among asset classes which may provide robustness to the portfolio in the event of volatility. Gold or silver ETFs are specifically designed to replicate performance of underlying assets for investors. These ETFs disassociate investors from emotional attachment to physical metal and provide clear liquidity. Investors who can take allocation tasks on their own can use ETFs otherwise multi-asset allocation funds are there to help investors.Do you think 2026 could be the year where mean reversion plays out and Nifty will perform differently relative to precious metals?Precious metals are experiencing price-agnostic buying from a specific class of investor which is central banks. Various central banks are allocating capital in precious metals to diversify their risk away from US Dollar holdings and we do not know how long this allocation will keep going on. Our view on Nifty is independent of this move in precious metals. Nifty which has experienced time correction for a year, looks prime for revival in performance over time as (i) pressure of selling from FIIs should reduce and (ii) earning delivery to commence as we progress in FY26.Which sectors or themes do you think will drive the next 2–3 years of market leadership — manufacturing, consumption, or platform companies?We are positive on sectors like consumption due to multiple levers which are playing out for the sector in FY26-27. The consumption sector may see triple benefits due to 1) GST cuts leading to an increase in affordability, 2) Increase in discretionary income in the hands of India’s middle class due to direct tax cuts, 3) Upcoming pay-commission in FY27. We expect not only volume growth but also premiumisation led profitability advantages to this sector. We believe consumption sector benefits could be broad based across platform companies, retailers, FMCG companies as well as companies anchored to these themes like mall operators or financiers. We expect this tailwind to drive earnings delivery at least in FY26-28 and hence it could be a multiyear theme rather than just FY26. Moreover, due to the domestic nature of this sector, it could be insulated from external shocks like tariffs.Live EventsWe are also positive on the financial sector. We expect headwinds in the financial sector can be behind in a couple of quarters – adding to our positivity on the financial sector from a 2-year perspective.India is currently among the weaker performing major global equity markets in 2025. Do you think India can come on top of this table in the next 1 year?2025 has been an interesting year with a lot of external factors like tariff, geopolitics, trade wars and currency volatility impacting us. While domestic investors have held the fort, FII selling has been relentless. Our view is India will be an attractive market for FIIs in future leading to their flows coming back to India.Tell us which other sectors you are focusing on and why?We are positive on the industrial sector, as India’s capacity utilisation is at elevated levels, we believe capex intensity is not going to reduce in fact it is going to increase as we progress in FY27. To capture that, we are focusing our efforts on bottom-up ideas in the industrial sector like precision manufacturing, semiconductor supply chain. We are also focussing on AI related plays in specific funds due to the government’s impetus on this segment. Currently, the market seems to be poised on a turning point again due to changes in the external environment and government’s actions to counter those threats which is leading to swift changes in sectorial preferences.In the last couple of earnings cycles, we have seen midcap companies reporting relatively better numbers. Do you think this trend will continue in Q3 as well?Indeed, particularly in the past 2 quarters we have seen good show from midcap companies. If you recollect FY25 had been a lacklustre year for earnings due to various reasons and base is not demanding. Midcaps are in position to take benefits of cyclical recovery; hence we are expecting the trend of midcaps to have potential of delivering better numbers to continue in the foreseeable future.What risks are most underappreciated in the market today, in your view?In my view, there are couple of areas which market seems to be complacent in pricing-in 1) disruption risks due to artificial intelligence in existing business models is not yet clear, 2) domestic flows have been strong – we do not completely know how these investors who have not seen cycles would react in current volatile phase of the market.Add as a Reliable and Trusted News Source Add Now!
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