Krishna Sanghavi, Chief Investment Officer of Equities at Mahindra Manulife Investment Management, is bullish on India despite the challenges posed by stretched midcap valuations and unpredictable short-term market movements.

“There are structural reasons to be bullish on India,” Sanghavi stated.

He believes the fundamentals are good for the country and sees a surge of liquidity.

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From the market side, earnings are reasonably okay and not every sector is going to grow at the same time and that is the beauty of the sector rotation or profit pool participation of the economy that we play out, he said.

He pointed out that the China+1 theme, a strategy where companies diversify their supply chains away from China, is largely playing out across various sectors.

However, Sanghavi cautioned investors about the current state of midcap stocks, noting that their valuations are stretched. “Short-term moves are difficult to predict,” he added, advising a more cautious approach in the near term.

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Sanghavi expressed optimism about specific sectors, including financials, telecom, fast-moving consumer goods (FMCG), consumer staples, and power, which he believes are well-positioned for growth.

On the other hand, he mentioned that the earnings potential of companies in the railways and defence sectors appears to be already priced in by the market.

“Prefer to wait for a better entry point,” he said.

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When asked about investment opportunities, Sanghavi suggested participating in new Initial Public Offerings (IPOs) where valuations are attractive.

For more, watch the accompanying video.