Avinash Agarwal explains why real estate sector can be a good contra bet for 2026

Avinash Agarwal, senior vice president & head – Equity at Bandhan Life, believes the real estate sector can be a good contra bet for 2026.

"This year (2025) we saw a correction in this sector, and valuations have come to a more reasonable level. We also witnessed rate cuts this year, which should help boost demand, especially in the value segment," he said in an interview to Moneycontrol.

He believes 2026 will be much better for the mid and small-cap segment given that the earnings growth is expected to improve and the full benefit of rate cuts, GST reforms, and other announcements will flow into the economy.

Are you positive on the entire value chain within the capital markets space for 2026?

We are reasonably positive on the entire value chain of the capital market as it is an emerging sector. The financialization of the economy has been taking prominence in the last few years, and we believe there is still a long way to go. Also, most of these businesses are capital light and generate good ROEs for the investors.

Do you expect 2026 to be a significantly better year than 2025 for equity markets, given that most negative factors appear to be discounted and several others have turned favourable for India?

Yes, we believe 2026 will be better than 2025 given that we have seen relatively muted returns from the market. While the Nifty has given about 10% returns, some segments of mid- and small-caps have seen meaningful correction.

We believe 2026 will be much better for the mid and small-cap segment given that the earnings growth is expected to improve and the full benefit of rate cuts, GST reforms, and other announcements will flow into the economy.

Despite the prevailing market perception that midcaps are overvalued, we are launching a new midcap fund in early 2026. Our conviction is based on two key pillars. First, midcaps have historically been the market’s top-performing segment over the long term, making them an essential component for life insurance portfolios. Second, we believe high-growth midcap companies should be evaluated using the Price/Earnings-to-Growth (PEG) ratio rather than a standard P/E multiple. On a PEG basis, midcaps are currently trading at attractive levels relative to large caps.

For 2026, do you prefer domestic economy–focused sectors over export-oriented sectors?

We believe that the domestic economy will be far more resilient compared to the global economy in the near future. The global economy is facing some challenges, in the form of conflicts, slower growth, currency challenges and fear of overspending on AI.

The domestic economy, on the other hand, is growing at a steady pace, boosted by favourable demographics, government reforms, lower interest rates, and clean balance sheets of the banks and companies. In this context, the mid caps are a better proxy for the India growth story.

Are you avoiding the IT services sector even in 2026, considering the possibility of a weakening US economy?

The IT sector has faced several challenges over the past 2–3 years, with AI being the biggest one at present. The companies need to adapt to this change. We have seen the Indian IT players adapt to technological changes in the past and continue to grow.

We believe the companies would be able to do it again. Some of these challenges have been factored into the valuations already. For 2026 we have a neutral view on the sector.

Do you expect any announcement related to an India–US trade deal from Trump in the next couple of weeks? Would such an announcement have more of a sentiment-driven impact rather than a fundamental one?

It is very difficult to give a timeline on the signing of any deal given the number of complexities involved. However, we believe that a deal would certainly be positive, as the US is a large export market for Indian companies. Some labour-intensive sectors such as gems and jewellery and textiles are dependent on exports to the US. Hence, if a deal is announced, it would certainly have a positive fundamental impact on the businesses and economy.

What is your contrarian (contra) bet for 2026?

We feel the real estate sector can be a good contra bet for 2026. The sector started its revival post-covid where we saw both price and volume recovery. While the price increases have slowed now, we continue to see decent volume growth. The industry has consolidated meaningfully in the last decade due to RERA and the previous down-cycle, and the survivors should do well now.

This year we have seen a correction in this sector, and valuations have come to a more reasonable level. Also, we have seen rate cuts this year, which should help boost demand, especially in the value segment.