Indian stocks may recover on steady growth and earnings, Axis AMC says

The Nifty 50 has fallen about 12% so far in 2026 after 10 straight years of gains, pressured by higher oil prices following the US-Israeli war on Iran and record foreign outflows of $31.3 billion as investors favoured markets offering exposure to the AI boom.

"While markets are grappling with peak macro uncertainty from elevated crude prices, geopolitical tensions and global monetary tightening, India's sustained growth above 7% could brighten the outlook," said Sachin Relekar, senior equity fund manager at Axis AMC, which manages assets worth 3.66 trillion rupees ($38.5 billion).

Relekar cautioned against reading too much into foreign fund outflows, saying they reflected factors such as crude prices, currency movements and global bond yields rather than concerns about India's growth prospects.

Sustained domestic inflows highlight the long-term financialisation of household savings, with substantial funds still held in fixed deposits, he said.

His investment approach remains focused on stock selection, with AI-led capital expenditure, energy, electrification, domestic manufacturing and consumer internet among his preferred themes.

He also favours private-sector banks and non-bank financial companies due to attractive valuations and steady earnings outlook, while expecting manufacturing to remain supported by government policy.

"In some cases, earnings have moved forward but prices have not moved as much due to global factors. That said, the risk-reward is much better than it was a year ago, which will help a rebound," he said.

Relekar cautioned against businesses vulnerable to technological disruption and companies facing intense competition from e-commerce platforms.