Why Bandhan Life’s Avinash Agarwal sees a fresh opportunity in broader markets now

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

According to Avinash Agarwal, the Senior Vice President & Head- Equity at Bandhan Life, the scope of earnings disappointment has reduced.

In fact, he believes double-digit earnings should be possible given that there is a low base of earnings and there is a general buoyancy in the domestic markets due to the incentives given by the government on both direct and indirect taxes.

The credit growth has been picking up over the last few months, signalling a pickup in the economy, he said in an interview to Moneycontrol.

He believes this is a good time to invest in the broader markets.

He is positive on the data centre theme which has got a huge leg up due to the AI boom. "We have played this mainly through the capex beneficiaries and electricity value chain."

Do you strongly believe that the renewed tensions in West Asia will not pose any major risk to equity markets?

It is very difficult to guess as to how the situation will develop. From equity markets’ point of view, the longer it goes on, the more negative it will be given the inflationary impact it can have.

The control over Strait of Hormuz seems to have become the new bone of contention. However, one difference between March and now is that the markets are better prepared to absorb the news and manage the situation.

If so, do you expect the markets to regain strong footing in the second half of the current fiscal year?

The markets generally move based on earnings growth expectations. Earnings growth will depend on the war situation given India's import dependence. However, the broader markets have not given returns over the last two years. This has normalised expectations and made the valuations more reasonable.

Hence, the scope of earnings disappointment has reduced. We believe this is a good time to invest in the broader markets. We are launching a multi-cap fund to capture this opportunity, as multi-cap funds invest across the broader markets and have exposure to large, mid and small cap stocks. This will enable the investor to invest across the broader markets through a single fund.

Do you expect the US Federal Reserve to maintain the status quo on interest rates for the remainder of 2026, considering the latest FOMC minutes?

As of now the markets believe that there will be one rate hike by the end of 2026. The fed dot plot suggested an even split between no rate hike and at least one rate hike.

Considering that the war in the Middle East has started again, there is a possibility of higher expectations of inflation during the year, which could lead the FOMC to increase rates. However, their decision depends on the incoming data.

Are you confident of double-digit earnings growth in the second half of FY27 and throughout FY28 despite the renewed tensions between the US and Iran?

Yes, we believe double-digit earnings should be possible given that we have a low base of earnings and there is a general buoyancy in the domestic markets due to the incentives given by the government on both direct and indirect taxes. The credit growth has been picking up over the last few months, signaling a pickup in the economy.

Are you bullish on the data centre theme driven by the AI boom?

Yes, we are positive on the data centre theme which has got a huge leg up due to the AI boom. Also, the government’s announcement of a tax holiday until 2047 in this year’s Union Budget and the clarity on taxation for foreign companies have brought a lot of optimism in the industry.

From our research, we understand that there is a lot of interest in setting up data centers in India, and we could see announcements of this over a period.

If yes, are you playing the data centre theme by taking exposure to the electricity value chain?

Yes, we do have beneficiaries of the data centre theme in our portfolios. We have played this mainly through the capex beneficiaries and electricity value chain.

Do you expect volume growth to outpace AI-related deflation for IT services companies? Are you taking exposure to the IT sector?

Developments in AI are growing at a fast pace, and we will know the full impact over a period. Right now, it looks like there will be an impact on the IT services companies initially, and over a period there could be greater demand for services.

However, as of now there is very little clarity on this. Also, looking at the competition in the sector, we are closely watching the margin trajectory of these companies to see if they can sustain these margins. We have been underweight on the IT sector.

Do you see strong earnings growth in Midcaps? If yes, do you have major exposure to midcap over large and smallcaps?

Yes, we are expecting strong growth in midcaps in the foreseeable future. Exposure to any category depends on the mandate of the fund. Also, we take bottom-up calls on stocks rather than decide on which category we need to invest in.

Having said that, at the moment we do have a slightly higher weight in mid-caps and small-caps relative to the index in the funds where we are allowed to invest in all these capitalisations. This is mainly due to the earnings trajectory of some of these companies.

We believe that the investors should be investing in the broader markets now due to broad-based earnings recovery. They can do this through a multi-cap fund to participate in the entire market.