Nifty 50 likely to post 15% earnings growth; infra, consumption, financials to lead: Bharti Sawant of Mirae Asset

Nifty 50 is expected to deliver 15% earnings growth over FY26-27, while Capital Goods, Defence, Renewables, Realty and EMS are some of the themes which look interesting at the current juncture, said Bharti Sawant, Fund Manager at Mirae Asset Investment Managers (India).

In an interview with Livemint, Sawant highlighted the multiple factors which led to market correction over the last 18 months, including global reallocation of funds by FIIs, high valuations, investments in AI-driven stocks (primarily US & China), US trade chaos and domestic growth slowdown.

She expects the Indian stock market to track earnings growth hereon and believes Infrastructure, Consumption and Financials would be key drivers of growth. Here are edited excerpts:

What is your current reading of the market? Do you see it consolidating or anticipate a rally?

We believe the stocks have already factored in the impact of US tariffs, and from hereon, markets are set to track earnings growth.

The broader market (Nifty 50) is expected to deliver earnings growth of 15% over FY26-27E. We believe the measures taken by the government to boost consumption are expected to translate into better growth from Q3 onwards, while the infrastructure space continues to deliver healthy growth driven by improved execution.

Infra is a broad theme. What part of the theme excites you the most?

Infrastructure is a broad-based theme which provides the flexibility to be overweight or underweight different sectors or sub-sectors at different points in time. Capital Goods, Defence, Renewables, Realty and EMS are some sectors which look interesting at the current juncture. We believe that these sectors can deliver higher earnings growth over the next 2-3 years.

We have already seen a heavy rally in infra stocks. Should investors consider buying now?

The infrastructure theme has outperformed the broader markets over the past 4 calendar years, driven by a substantial increase in the government capex (both central and state). Having said that, the valuations have corrected from the peaks over the past 12-18 months, and earnings and order inflow visibility have only improved. Further, the earnings growth for the sector is projected to grow significantly higher versus the broader markets.

We believe India’s infrastructure space has now become a structural theme, driven by various policy reforms done by the government over the past 10 years, and it has become more broad-based with the inclusion of newer segments like data centres, renewables, etc. Therefore, in our view, it still makes sense to invest in infrastructure themes provided the investors have an adequate risk appetite and a longer time horizon.

What differentiates your fund’s strategy from other infra funds in the market?

The infrastructure theme has the potential to generate higher returns, but at the same time carries commensurate higher risk. To mitigate this, we intend to maintain a balanced portfolio under Mirae Asset Infrastructure Fund, which will invest in a mix of high-growth businesses complemented by more mature or traditional businesses, with limited and more tactical allocation to special situation ideas with a view to delivering a smooth and rewarding investment experience.

The portfolio will be tilted towards high-growth businesses where projected earnings growth is significantly higher and will help deliver meaningful alpha over the medium to long term. Matured businesses, on the other hand, offer earnings growth in line with nominal GDP growth but, owing to their steady and strong cash flow stream, provide the much-needed stability to the overall portfolio and limit downside risk during market corrections.

This combination will allow the fund to capitalise on the upside potential which this theme offers while limiting the drawdowns. As and when opportunities arise, the fund will seek to invest in tactical ideas which are likely to benefit from any favourable policy changes, changes in sector dynamics, technological advancements, corporate restructuring, etc.

Infra boom has mostly been led by govt capex. Is there any indication of private capex kicking in?

You are right that the rally in the infrastructure theme has been driven by strong government capex since FY21. Given that consumption was impacted owing to higher inflation, restrictions on lending and back-ended government capex on account of general elections, the focus has shifted to reviving consumption demand. Having said that, government capex is expected to stabilise at the current levels.

On the other hand, we are seeing early signs of a revival in private capex (including PSU capex) reflected in capex announcements and on-ground execution. Corporate balance sheets look very healthy, driven by lower leverage and higher profitability. Further, the capacity utilisation levels are hovering around the 80% mark, which has historically been the trigger zone for a rise in private capex. All these factors, along with policy tailwinds, should help drive Private capex in a meaningful way going ahead.

Beyond infra, what are the other sectors or segments you are bullish on?

As discussed above, various measures like tax cuts, GST 2.0 reforms, interest rate cuts along with normal monsoons and potential increase in liquidity led by the upcoming 8th pay commission bodes well for consumption growth. We expect consumption growth to also drive pickup in credit offtake. Hence, I believe the overall market is expected to see a revival with key drivers of growth being Infra, Consumption and Financials.

What are the key risks and challenges that you see for the market?

Key risks would include geopolitical and tariff or trade-related volatility. We believe markets have priced in the uncertainty with regard to tariff measures, while policy shift remains unpredictable. Domestically, we believe India is relatively stable, driven by strong domestic consumption growth, and an increased push on manufacturing will help reduce dependence on imports while also helping to retain the value creation within the country.

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