Despite concerns over high valuations in smallcap and midcap stocks, Venugopal Manghat, CIO-Equity at HSBC Mutual Fund, believes the market is nearing a bottom and offers strong investment opportunities.

HSBC Mutual Fund, which manages $15 billion in assets, remains optimistic about India’s long-term economic trajectory.

Manghat sees consumer discretionary and financial services—especially non-lending financial firms—as key areas for growth.

While banking stocks appear relatively attractive, he remains cautious due to slow credit growth and peak net interest margins (NIMs), which are tied to an uncertain private capital expenditure (capex) recovery.

Manghat is bullish on consumer discretionary stocks, driven by potential interest rate cuts and policy support. He also sees strong potential in non-lending financial services, comparing India’s current growth trajectory to the expansion of the US market in the past.

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India’s structural economic growth is another key factor supporting this outlook. Manghat expects the economy to double from $3.8 trillion to over $7 trillion by 2030, creating significant investment opportunities in consumer and manufacturing sectors. While small and midcap stocks are trading at high valuations, he believes many smaller companies could still multiply in value over time.

Foreign institutional investors (FIIs) have been aggressively selling Indian stocks, partly due to expectations of Donald Trump’s return to the White House, which has strengthened the US dollar and increased bond yields. However, Manghat believes the worst of FII outflows may be over, as India remains underweight in many global portfolios.

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On global markets, Manghat warns that US tech stocks, particularly in artificial intelligence (AI), may have overheated. While AI remains a long-term growth driver, he notes that current valuations may not be sustainable. “The sector has absorbed extraordinary investment, and the results may not meet expectations,” he said.

For the full interview, watch the accompanying video

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