Rakesh Vyas, CIO at Quest Investment Managers, sees growth potential in consumer discretionary and cement sectors through 2027. As Indian companies report resilient profit growth, he suggests shifting toward a selective, bottom-up approach focused on company-specific performance. Investors should pay close attention to earnings quality and management execution rather than relying on broad market gains.
Rakesh Vyas, the Chief Investment Officer at Quest Investment Managers, has outlined a strategy favoring consumer discretionary and cement sectors for the period leading into 2027. This perspective comes as the Indian equity market shows resilience, with Nifty companies reporting profit growth between 18% and 19% for the September quarter. While broader market valuations are being adjusted, Vyas suggests that the current environment favors investors who can identify businesses with distinct competitive advantages rather than those just following market trends.
Why Consumer Discretionary and Cement
The preference for the consumer discretionary sector is driven by the ongoing shift toward higher-value products, often called premiumization, and the growing reach of organized retail chains. Vyas notes that tax policy changes, such as adjustments to income-tax exemption thresholds, along with GST rationalization, have provided a necessary cushion for household spending. As consumers show an increasing preference for convenience and branded goods, companies that can cater to this demand effectively are likely to gain market share.
Simultaneously, the cement industry remains a key focus area. The sector’s growth is underpinned by steady demand from large-scale infrastructure projects and the housing market. For investors, the performance of cement companies will likely depend on their ability to manage pricing discipline and improve capacity utilization. As infrastructure spending continues to be a priority for domestic growth, cement manufacturers that can optimize their operations may stand out.
Earnings Outlook and Selective Investing
Looking ahead to the 2027 financial year, expectations for corporate earnings growth hover around 11% to 12%. Vyas emphasizes that the era of relying on broad market rallies is likely evolving into a phase where company-specific earnings acceleration becomes the primary driver of stock performance. This transition means investors may need to be more selective, focusing on firms that have demonstrated strong earnings visibility and reliable execution quality.
Monitoring Market Risks
Despite the positive domestic outlook, the market faces several external pressures. Global geopolitical tensions continue to impact trade dynamics and commodity prices, which in turn can lead to increased raw material and energy costs for manufacturers. Such expenses can put pressure on profit margins if companies are unable to pass these costs on to customers. Additionally, the flow of foreign funds remains variable, and market consolidation may persist if corporate earnings recovery takes longer than anticipated. Investors should track how companies navigate these cost pressures and whether they can maintain steady cash flows in a volatile environment. The ability of a business to maintain its profit margins while managing debt levels will be a key factor in determining its long-term performance.