Key Points:
India accelerating export diversification, seeking new trade agreements
Nifty 50 shows softer earnings; mid-cap companies outperform
Domestic consumption supported by GST cuts and low inflation
Portfolio shift towards banks with sustained focus on export-driven sectors
India’s export momentum remains robust as it diversifies beyond traditional partners, according to Mugunthan Siva from India Avenue Investment Management. Siva points to ongoing negotiations for a bilateral trade agreement with the United States and highlights that India has proactively expanded export relationships with regions including the Middle East, Asia, Latin America, and Europe. Key export categories remain strong, covering generic pharmaceuticals, auto ancillary component parts, gems and jewellery, and seafood. Siva indicates India’s ambition to become a developed economy by 2047 relies on further export growth, leveraging its established expertise and benefiting from global dynamics such as the China plus one strategy.
Turning to equities, Siva highlights recent earnings results from the Nifty 50 index with growth of 4-4.5%, noting that banking and financials weighed on the index but should recover cyclically. In contrast, Siva observes mid-cap companies, represented by the 600 index, posted robust 25% earnings growth, driven by sectors like second-tier IT services, auto ancillaries, infrastructure, and cement. He suggests operating leverage and scaling up remain critical themes for these emerging companies.
Siva also reports strong growth in Indian consumer sectors, especially in EVs and SUVs, fuelled by GST reductions and improving macro conditions. He shares a shift towards an overweight banking position while maintaining emphasis on export-oriented sectors like pharmaceuticals, expecting renewed focus as trade deals materialise.
