Anil Rego of Right Horizons projects a 12% earnings growth CAGR for the Nifty through FY28, identifying 10 structural sectors for long-term investors. He emphasizes focusing on quality businesses with strong balance sheets rather than reacting to short-term market volatility.
As Indian equity markets navigate a period of uncertainty driven by global and local macroeconomic factors, analysts are increasingly pointing toward structural trends as the primary engine for future returns. Anil Rego, Founder and Chief Investment Officer of Right Horizons, has spotlighted 10 key sectors that stand to benefit from India's long-term growth trajectory over the next five to ten years.
Rather than attempting to time the market or chase short-term trends, Rego emphasizes the importance of a 'Growth at Reasonable Valuation' framework. This approach prioritizes companies that show sustainable earnings growth while avoiding overpaying for stocks simply because they belong to a popular sector.
Key Themes for Structural Growth
Rego’s identified list of structural themes includes manufacturing, electronics manufacturing services (EMS), financial services, healthcare, renewable energy, consumer goods, defence, semiconductors, real estate, and capital markets. These sectors are seen as being in the early or mid-stages of a long investment cycle. For instance, the focus on manufacturing and EMS aligns with broader supply chain diversification efforts, while renewable energy and semiconductors reflect India's push toward energy security and technological self-reliance.
Financial services and real estate remain pillars of this outlook, supported by domestic credit growth and increasing urbanization. However, Rego cautions that investors should not view these sectors as a blanket opportunity. Instead, he suggests a disciplined, bottom-up approach—where the quality of individual companies, their balance sheet strength, and earnings visibility are more important than the broader sector label.
Earnings Outlook and Risks
Looking at the broader market, Right Horizons projects a healthy earnings growth trajectory for the Nifty, estimated at a 12% compound annual growth rate from fiscal year 2026 through 2028. This expectation of earnings delivery is the cornerstone of Rego's outlook; he argues that while liquidity and sentiment can drive prices in the short term, actual profit growth is the only factor that sustains stock prices in the long run.
Investors are advised to be mindful of valuation risks. After years of strong performance, valuations in certain segments of the market have become stretched. High valuations increase the risk of disappointment if a company fails to meet growth expectations, even if the sector itself is growing. Consequently, the focus should remain on businesses that can maintain stable margins and healthy cash flows, even if the general market environment becomes volatile. Avoiding the urge to reduce equity allocation due to temporary market dips—provided the core portfolio consists of quality companies—is a key part of this strategy.