Banking Sector: Valuations Attractive, Larger PSU Banks Better Placed
“When you talked about PSU banks, let me just take a step back and maybe discuss what is happening in the overall banking sector and then come to the PSU banking pack,” Kurian began. According to her, the broader banking space has faced multiple headwinds—lower credit growth and margin pressure—but both are now showing signs of easing. “We are possibly coming to the end as far as both credit is concerned and therefore, we start seeing some uptick as far as credit growth goes… and the recent management commentary seems to suggest that, especially where retail is concerned.”
She believes margin pressures are likely to abate given that rate cuts are yet to start, and that from here on, earnings growth will be led by core banking operations.
“Our preference has been for the private banks. However, within the PSU banks, there are specific picks where some of the larger PSU banks are better placed to benefit both from credit growth picking up, especially on the retail front, as well as margins bottoming out… The sector in terms of valuations is attractive especially relative to history notwithstanding the near-term move,” she added.
NBFCs: Stock-Specific Play as Stress Bottoms Out
While banks remain her preferred segment, Kurian sees select opportunities within NBFCs. “Our preference within the overall banking space or overall financial services space is slightly tilted towards banks. Within NBFCs we have been fairly stock specific, looking at NBFCs where growth has been strong and asset quality is a clear differentiator,” she said. She noted that while the unsecured and microfinance segments are showing signs of bottoming out, the SME segment will need to be monitored closely. “Within the NBFC pack, valuations are not as attractive as it is in the case of banks and therefore, we have been selective as far as NBFCs go,” she emphasized.
Consumption Story: Discretionary Demand Making a Comeback
Kurian also turned optimistic on the consumption theme, particularly discretionary spending. “There have been a slew of policy measures both from the fiscal side starting with the tax cuts that happened during budget, followed by GST rationalization, as well as monetary push because of the 100 basis points of rate cuts… Overall, our view on consumption has been positive,” she said.
Within consumption, her focus remains on autos, particularly two-wheelers and entry-level four-wheelers. “The data flowing through this festive season seems to corroborate that there is indeed some pick-up in demand… one of our preferred picks has been the auto space,” she added.
Consumer Durables: Weather Impact Behind, Gradual Recovery Ahead
On the consumer durables front, Kurian expects a gradual recovery post the monsoon disruptions. “Some parts of the consumer durable segment clearly got impacted because of the weather patterns… this is also a segment that does benefit because of policy changes. Within the consumer durable pack, the smaller ticket consumer durable segment seems to have received a push faster,” she explained.
She believes the entire discretionary basket, which includes retail and quick commerce, is poised for a steady recovery over the coming quarters.
Earnings Outlook and Sector Preferences
Looking at the broader market earnings trajectory, Kurian expects improvement into FY27. “While the current quarter earnings estimates are muted… going into FY27, it is likely that Nifty earnings picks up and we see mid-teens kind of an earnings trajectory,” she said.
Her top sectoral bets: banking, consumption, and healthcare. “Apart from banks and consumption which are our top two sectors, the other segment that we have been positive on is healthcare as a space, specifically hospitals… we believe that return ratio profile of the sector remains strong and valuations still are reasonable,” Kurian said.
IT: A Wait-and-Watch, But Long-Term Potential Intact
On IT, Kurian called it “somewhat of a contra call for now.” She pointed out that while near-term growth may remain muted due to seasonal factors and global demand uncertainty, AI adoption could become a long-term tailwind.
“There is a lot of debate as to whether AI will take away growth from the IT services pack… but as enterprises adopt AI more and more, there is a lot of work for the Indian IT services segment to benefit from,” she noted, adding that strong deal wins provide comfort.
Pharma: Domestic Plays and Hospitals Hold Promise
On pharma, Kurian highlighted a divergent outlook across sub-segments. “The domestic pharma piece continues to show steady growth… within the pharma pack our bent has been towards the domestic pharma piece, some opportunities also coming through in the CDMO segment given what is happening globally,” she said.
She remains positive on hospitals, domestic formulations, and CDMO plays, while advising caution on the US generics space due to pricing and tariff uncertainties.
