Why Rupen Rajguru sees further upside in Indian equities and which sectors could outperform

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With corporate earnings growth potentially reaching 18-20%, Julius Baer India's Rupen Rajguru sees opportunities beyond the recent market rally. He expects the Nifty to benefit from a possible catch-up after two years of weak returns. He also identifies aviation, oil marketing companies, consumer businesses and cement as potential beneficiaries of lower crude prices.

The sharp recovery in Indian equities over the past month has improved investor sentiment, but Rupen Rajguru, Head of Equity Investments and Strategy at Julius Baer India, believes there is room for the market to rise further. His optimism is backed by an improvement in corporate earnings, broader participation in the earnings recovery and the possibility of upward revisions to growth estimates.

In an interview with CNBC-TV18, Rajguru said India's earnings growth had become more widespread, with companies across most sectors reporting double-digit growth in the second quarter. He also identified aviation, oil marketing companies (OMCs), consumer-related businesses and cement as potential beneficiaries of lower oil prices. Within cement, he sees better relative opportunities among companies based in southern India.

The improvement in Indian equities over the past month has been particularly significant for foreign portfolio investors (FPIs). Rajguru pointed out that the Nifty had gained around 14-15% during this period, while the rupee had appreciated by approximately 3%. This translated into returns of nearly 18% in dollar terms for overseas investors.

He said India had been an under-owned and relatively undervalued market from an FPI perspective a month earlier. The shift in global investment sentiment, including developments in the US following the Democratic win and the possibility of a slowdown in the AI trade, had also helped Indian equities.

However, Rajguru believes the more important factor supporting the market is the improvement in corporate earnings.

According to him, aggregate earnings growth in the second quarter was upwards of 20%, based on the results declared at the time of the interview. More importantly, the growth was not restricted to a handful of sectors. Almost every sector, barring one or two, reported double-digit earnings growth.

Around 45% of companies had also beaten earnings estimates, raising the possibility of further upgrades.

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Rajguru's…

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