Expert view: Market valuations neutral; overweight on materials, financials, says Siddharth Vora of PL Asset Management

Expert view: Siddharth Vora, Head of Quant and Fund Manager at PL Asset Management, is bullish on the Indian stock market due to strong GDP growth, controlled inflation, favourable tax reforms, GST revisions, and interest rate cuts. In an interview with Mint, Vora shared his views on market valuations, the sectors he is positive on, and FII trends. Edited excerpts:

Why are you bullish on India? What are the key positive factors that make you believe in India's story?

I am bullish on India because the domestic macroeconomic environment remains robust despite global volatility.

Our models show that Indian equities have entered a risk-recovery cycle with improved sentiment demonstrated by our risk-o-meter and the "senti-meter".

This is fundamentally supported by easing tariff concerns, steady domestic inflows, broad-based recovery across sectors, and neutral valuations. Moreover, strong GDP growth, controlled inflation, favourable tax reforms, GST revisions, and interest rate cuts are likely to drive strong consumption demand and improve corporate earnings.

Don't you think it is too early to discount a trade deal, earnings revival and a significant further rate reduction by the RBI?

A trade deal, earnings revival, and rate reduction by the RBI can certainly support the markets; however, I believe it is still premature to expect them imminently.

While low inflation combined with stable growth does provide room for further rate cuts, the full impact of a favourable trade settlement is yet to materialise.

The shift from offensive and hostile to defensive and accommodative monetary policy, along with an earnings revival, will likely transition the growth burden from government CAPEX to private consumption.

Stable growth creates the opportunity for additional rate reductions, but it may take some time before these factors fully align.

Why are the favourable inflation-growth dynamics not attracting FIIs? What can bring them back to the Indian market?

Despite India’s strong macro fundamentals, foreign portfolio investors have recently pulled out $3.3 billion, marking the heaviest outflows since February 2025.

This is largely driven by global uncertainties, trade disputes, particularly the imposition of US tariffs on Indian exports.

This has created a negative sentiment around India’s trade outlook. Moreover, foreign money flowed to other markets previously because India's valuations were relatively expensive and perceived geopolitical risks were higher compared to peers.

Now, with valuations becoming neutral relative to other emerging markets and geopolitical risks moderating, combined with improving macro fundamentals, foreign flows are expected to return to India.

To regain FII confidence and attract foreign capital back, a revival in corporate earnings coupled with clarity and certainty around favourable trade and tariff policies will be critical.

As confidence builds around these factors, India’s valuation attractiveness versus peers will improve, encouraging FIIs to increase allocations.

Is it time to focus on value or bet on growth stocks?

During a rate cut cycle, growth stocks tend to do better. We prefer growth over value because the value cycle has already played out when we were in a high-rate cycle.

How do you see market valuation? Is the mid and small-cap segment too hot to sustain?

Market valuations in India are currently neutral—not too lucrative, expensive, or euphoric—supported by solid GDP growth, controlled inflation, and strong domestic liquidity.

Large—and mid-cap stocks offer attractive risk-adjusted returns with improving earnings.

The small-cap segment is more volatile and under pressure, reflecting higher risks, so it may face challenges sustaining recent gains.

What are the sectors that can generate alpha in the next one to two years? What are your top picks from these sectors?

We remain overweight on materials and financials. Within materials, we prefer metals, mining, cement, and chemicals, which offer attractive growth and valuation.

In financials, we prefer capital markets, asset management companies (AMCs), and select NBFCs.

We also hold selective exposure to consumption (discretionary), industrials, autos, and healthcare. Portfolio winners include AB Capital, LTF, Radico, HDFC AMC, Endurance, MOSL, Bharti Airtel, Chalet Hotels, Hindalco, Tata Steel, and GMDC.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.