Nifty vs gold: 2026 might mark the large imply reversion commerce, says Axis MF’s Shreyash Devalkar

Edited excerpts from a chat:

Following a yr of underperformance, how snug are you with valuations within the Indian fairness market now?

Over the previous yr, fairness markets skilled a pointy correction adopted by a rebound. At their peak, indices had been pushed by euphoric sentiment and aggressive shopping for from each FIIs and DIIs, leading to elevated valuations. The following decline helped average these valuations, significantly within the large-cap area, the place development has now slowed and valuations seem extra affordable. In distinction, segments equivalent to defence, energy capex, tourism, and electronics manufacturing companies (EMS) proceed to point out robust development, however valuations stay stretched. These themes are extra prominently represented within the mid- and small-cap segments. Because of this, traders could take into account sustaining diversified publicity throughout market capitalizations.

We consider markets might stay rangebound within the close to time period. In such an atmosphere, alpha technology will rely closely on inventory choice. Notably, roughly 35% of shares are buying and selling above their ranges since a yr in the past, when the market was at its peak, highlighting the significance of being selective.

The market is anticipating earnings restoration in H2 of FY26. What are your expectations and which pockets of the market do you suppose would be the ones to recuperate the quickest?

The tempo of EPS downgrades has moderated in current months, although Q2FY26 might even see additional revisions because of the present weak demand atmosphere. Nevertheless, going ahead, we anticipate a interval of steady earnings following important downgrades over the previous 12–15 months. Over the subsequent few quarters, we anticipate earnings development to be pretty broad based mostly. A steady supportive macro atmosphere, decrease coverage charges and earnings tax coupled with GST cuts might assist market recuperate. Given the present state of affairs, we consider that financials, consumption associated sectors and energy and so on might be the sectors which might see restoration in development.

How are you positioning portfolios given the sharp run-in auto and consumption shares post-GST cuts?

Following the GST rationalization, the development towards premiumization is anticipated to strengthen, supported by a pickup within the alternative cycle. GST cuts are more likely to cut back passenger car (PV) costs by 5–10% and two-wheeler costs by round 8%, which ought to stimulate demand. We anticipate that aspirational product segments will profit extra as a consequence of greater demand elasticity. Whereas improved affordability will encourage first-time patrons, we consider the revival in alternative demand—muted lately—shall be a extra important development driver for PVs. Over the medium time period, development prospects via FY28E might be additional supported by the implementation of the Pay Fee and gradual advantages from earnings tax reductions.

Within the shopper durables area, the discount in GST from 28% to 18% for room air conditioners, large-screen TVs, and dishwashers brings these merchandise in step with different residence home equipment. Nevertheless, the affect is probably not quick, as shoppers are more likely to stagger purchases based mostly on earnings ranges and necessity. In the meantime, the Auto Index has already rebounded to its 2024 peak, rising almost 30% since April 2025. Shopper sturdy shares have additionally rallied. The sustainability of this momentum will depend upon precise quantity development in the course of the festive season, its continuation thereafter, and the margin outlook for the rest of the yr.

Multi-asset allocation funds have grown in reputation because of the rise of gold and silver. What can be your recommendation for traders trying to perceive whether or not they need to spend money on gold-silver ETFs or go away the asset allocation job by way of a multi-asset allocation fund?

For many traders, multi-asset allocation funds supply a handy, all-in-one funding answer. These funds present diversified publicity throughout asset courses—together with gold and silver—whereas benefiting from skilled administration and dynamic rebalancing. Fund managers can alter allocations based mostly on market circumstances, valuations, and macro developments, which provides precious flexibility in risky environments.However, gold and silver ETFs supply direct publicity to the worth actions of those valuable metals. They’re well-suited for traders who wish to take a targeted place in gold or silver, significantly as a hedge in opposition to inflation or geopolitical uncertainty. There’s no one-size-fits-all method. As a fund home, we encourage traders to undertake a disciplined asset allocation technique. Along with home diversification, we additionally advocate contemplating publicity to international equities to reinforce portfolio resilience and seize world development alternatives.

Do you suppose 2026 might be the yr of imply reversion when Nifty will outperform valuable metals?

Nifty’s earnings development and sectoral rotation (particularly into banks, telecom, and chemical substances) recommend potential for outperformance versus valuable metals, that are coming into a consolidation section. Valuable metals should still rally and may gain advantage from rupee depreciation, however the price of return might normalize, making equities extra engaging from a risk-reward perspective. Moreover. India’s PE premium to the rising markets stays beneath the 10-year common, however restoration in home economic system can set off EPS upgrades and rerating, driving relative outperformance.

Given various elements like GST, financial easing, earnings tax price cuts and low inflationary strain, consumption has now grow to be a consensus commerce on Dalal Road? How bullish are you and do you suppose we’re at the beginning of a multi-year cycle for autos and shopper performs?

GST reductions are anticipated to straight help earnings by driving greater quantity development—thanks to cost elasticity from profit pass-through—and by enhancing revenue margins for firms with pricing energy. Nevertheless, the broader affect will depend upon the cumulative impact of a number of elements: the implementation of the Pay Fee, gradual advantages from earnings tax and GST cuts, and doubtlessly decrease coverage charges. General, India continues to be a compelling long-term home consumption story. We consider the cycle for auto and consumption shares is poised to realize momentum, supported by structural tailwinds and enhancing affordability

Inform us which different sectors you’re betting on and why?

In opposition to the backdrop of decrease rates of interest, anticipated GST rationalisation, and a probable increase in consumption, we proceed to take care of an chubby stance on the consumption theme. If these macro tailwinds are successfully handed on to finish shoppers, they might reset India’s consumption cycle. As an example, advantages in sectors like cement and constructing supplies might improve housing affordability, which in flip could stimulate the credit score cycle. This underpins our chubby place within the monetary sector, significantly NBFCs, that are well-positioned to profit from elevated credit score demand and improved liquidity circumstances.

We additionally stay constructive on shopper discretionary performs—particularly in retail, hospitality, and journey & tourism—that are poised to realize from strengthening home momentum and festive season demand. Our GDP numbers validate our stance. We have now publicity to pick cars and we retain an chubby in prescribed drugs regardless of some pricing headwinds within the US. We stay underweight in IT. Moreover, we’re constructive on structural themes equivalent to renewable capex, energy transmission, and protection. General, India continues to supply a compelling medium- to long-term development alternative, supported by resilient home demand, a good rural outlook post-monsoon, and supportive macroeconomic indicators.

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