India's Stock Market Ignites! Expert Reveals Why Earnings Beat & Small-Cap Gold Rush is Here!

Manish Gunwani, Head of Equities at Bandhan Asset Management Co., suggests that Indian stock markets have become more attractive compared to other emerging markets. This is attributed to a one-year valuation correction that has moderated prices, while second-quarter earnings have surpassed subdued expectations, particularly in the IT and banking sectors.

Gunwani anticipates that the earnings downgrade cycle has ended and expects a significant improvement in the second half of the current fiscal year (FY26). This optimism is fueled by supportive domestic economic conditions, bolstered by fiscal and monetary stimuli, and a more stable global economic environment than previously feared. He predicts this will attract foreign portfolio investors (FPIs), provided the US dollar remains weak.

The expert favors selective small-cap stocks, believing they offer higher growth potential and greater opportunities for fund managers to generate 'alpha' through astute stock selection, outperforming larger-cap stocks over time.

Gunwani also touches upon the potential dual impact of Artificial Intelligence (AI) on India's economy, depending on its job creation versus displacement effects, and the proposed SEBI regulation on mutual fund brokerage fees, emphasizing the growing importance of in-house research capabilities.

Impact This news significantly impacts the sentiment and investment strategies for the Indian stock market. It suggests a potentially bullish outlook driven by earnings recovery and increased foreign investment. Rating: 9/10

Terms Explained: Alpha: In finance, alpha measures an investment's performance relative to a benchmark index. A positive alpha indicates the investment outperformed the benchmark. FPI (Foreign Portfolio Investor): An individual or institution that holds financial assets in a country other than their own, investing in stocks, bonds, or other securities. Macros: Refers to macroeconomic factors, which are broad economic conditions such as inflation, interest rates, GDP growth, and unemployment. Nominal GDP Growth: The growth in the total value of goods and services produced in an economy, measured at current prices, without accounting for inflation. Risk Premium: The excess return an investment is expected to yield over a risk-free rate to compensate for the associated risk. Risk Perception: The way investors and stakeholders view and assess the potential risks associated with an investment or market. Capital Flows: The movement of money for investment into and out of a country. Generic Pharma Exports: Exports of unbranded, off-patent drugs that are equivalent to brand-name drugs in dosage, safety, strength, and intended use. Punitive US Tariffs: Trade taxes imposed by the United States on imported goods, often as a penalty or to protect domestic industries.