Which sectors are poised to gain currently? Shripal Shah, MD & CEO of Kotak Securities, explains

Published in Business and Finance on Saturday, August 2nd 2025 at 18:40 GMT by Business Today
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Shripal Shah, MD & CEO of Kotak Securities, shares his views on where the Indian equity market stands amid global uncertainty, how digital tools are changing the way people invest, and the key trends shaping the future of investing in India.

Sectors Poised for Growth: Insights from Shripal Shah, MD & CEO of Kotak Securities

In a rapidly evolving economic landscape, investors are constantly seeking sectors that promise robust growth and resilience amid global uncertainties. Shripal Shah, the Managing Director and CEO of Kotak Securities, recently shared his expert analysis on which sectors are currently positioned to gain traction. Drawing from market trends, macroeconomic indicators, and sectoral fundamentals, Shah's insights provide a roadmap for investors navigating the complexities of the Indian and global markets. This summary delves into his key observations, highlighting the rationale behind each sector's potential and the broader implications for investment strategies.

Shah begins by emphasizing the importance of understanding the macroeconomic backdrop. He notes that India's economy is on a strong footing, with GDP growth projected to remain above 7% in the coming quarters, supported by robust domestic consumption, government infrastructure spending, and a rebound in exports. However, global headwinds such as geopolitical tensions, inflationary pressures, and fluctuating commodity prices necessitate a selective approach to investments. Against this context, Shah identifies several sectors that stand out for their growth potential, driven by structural tailwinds and favorable valuations.

One of the standout sectors, according to Shah, is information technology (IT). The IT services industry has been a cornerstone of India's export economy, and Shah believes it is poised for a resurgence. He points out that after a period of subdued performance due to global slowdowns in tech spending, particularly in the US and Europe, there are signs of revival. Factors such as the acceleration of digital transformation initiatives, the rise of artificial intelligence (AI), cloud computing, and cybersecurity needs are fueling demand. Indian IT giants like TCS, Infosys, and Wipro are well-positioned to capitalize on this, with their strong order books and expanding client bases in emerging technologies. Shah highlights that the sector's price-to-earnings ratios have corrected from their peaks, making valuations attractive. He advises investors to focus on companies with a high proportion of revenue from digital services, as these are likely to see margin expansions. Moreover, the weakening of the rupee against the dollar could provide an additional boost to export earnings, enhancing profitability. Shah cautions, however, that risks such as talent attrition and regulatory changes in key markets like the US could pose challenges, but overall, he sees IT as a defensive yet growth-oriented bet.

Shifting focus to the banking and financial services sector, Shah is particularly bullish. He argues that with the Reserve Bank of India (RBI) maintaining a vigilant stance on inflation while supporting credit growth, banks are in a sweet spot. The sector has undergone significant cleanup in recent years, with non-performing assets (NPAs) at multi-year lows, thanks to improved asset quality and prudent lending practices. Public sector banks, in particular, have shown remarkable turnaround stories, bolstered by government recapitalization and mergers. Shah points to private lenders like HDFC Bank and ICICI Bank as leaders, benefiting from strong deposit mobilization and expanding retail lending portfolios. The rise of fintech integrations and digital banking is another growth driver, enabling banks to tap into underserved segments such as micro, small, and medium enterprises (MSMEs). Shah predicts that as interest rates potentially peak and begin to moderate, net interest margins (NIMs) will stabilize, supporting earnings growth. He also notes the sector's role in funding India's infrastructure boom, with increased lending to projects under initiatives like the National Infrastructure Pipeline. For investors, Shah recommends a mix of large-cap banks for stability and mid-cap non-banking financial companies (NBFCs) for higher growth potential, while advising caution on over-leveraged entities.

The pharmaceutical sector emerges as another key area of opportunity in Shah's analysis. India's pharma industry, often dubbed the "pharmacy of the world," is set to benefit from global supply chain diversifications away from China, especially post the COVID-19 disruptions. Shah highlights the strength in generic drugs, active pharmaceutical ingredients (APIs), and contract research and manufacturing services (CRAMS). Companies like Sun Pharma, Dr. Reddy's, and Cipla are expanding their footprints in regulated markets such as the US and Europe, where patent expiries are creating opportunities for affordable generics. Additionally, the push towards innovation in biologics and specialty drugs is opening new revenue streams. Shah underscores the government's Production Linked Incentive (PLI) scheme as a catalyst, incentivizing domestic manufacturing and reducing import dependence. He anticipates that with rising healthcare spending globally and in India—driven by an aging population and increasing chronic diseases—the sector could see double-digit growth. Valuations in pharma are reasonable compared to historical averages, making it an attractive entry point. However, Shah warns of regulatory hurdles, such as US FDA inspections and pricing pressures, which could impact short-term performance.

Shah also turns his attention to the consumer goods sector, particularly fast-moving consumer goods (FMCG) and discretionary spending areas. He observes that rural recovery, fueled by good monsoons and government welfare schemes, is revitalizing demand for essentials like packaged foods, personal care, and household products. Urban consumption, meanwhile, is being driven by a growing middle class and premiumization trends. Companies such as Hindustan Unilever, ITC, and Nestle India are expected to benefit from this dual engine of growth. Shah points out that easing input cost pressures, with commodity prices stabilizing, will aid margin recovery. The sector's defensive nature makes it resilient during economic downturns, yet it offers growth through e-commerce penetration and export opportunities. He suggests investors look at firms with strong distribution networks and innovation in health-focused products, aligning with post-pandemic consumer preferences.

Infrastructure and capital goods form another pillar of Shah's optimistic outlook. With the government's ambitious capital expenditure plans, including investments in roads, railways, airports, and renewable energy, sectors like construction, engineering, and power are set to thrive. Shah mentions the PLI schemes for solar and green hydrogen as game-changers for renewable energy players. Companies like Larsen & Toubro, Adani Ports, and NTPC are highlighted for their order inflows and execution capabilities. He believes that as India aims for net-zero goals, investments in clean energy will accelerate, creating long-term value.

In the manufacturing domain, Shah is positive on automobiles and auto ancillaries. The shift towards electric vehicles (EVs), supported by subsidies and infrastructure development, is a major theme. Firms like Tata Motors and Maruti Suzuki are investing heavily in EV technology, while ancillary players in batteries and components stand to gain. Shah notes that improving semiconductor supplies and stabilizing raw material costs will support production ramps.

Shah doesn't overlook emerging sectors like defense and aerospace, where indigenization efforts under 'Make in India' are boosting local players. He also touches on real estate, expecting a revival due to urban migration and housing demand, with developers like DLF and Godrej Properties benefiting.

Throughout his analysis, Shah stresses the need for diversification and a long-term perspective. He advises against chasing short-term momentum and instead focusing on fundamentals like earnings growth, return on equity, and debt levels. In a volatile market, he recommends using systematic investment plans (SIPs) for equity exposure. Shah concludes that while risks like global recessions or domestic policy shifts exist, the selected sectors align with India's structural growth story, offering compounded returns for patient investors.

This comprehensive view from Shripal Shah underscores a balanced optimism, blending cyclical recoveries with secular trends. As markets evolve, these insights serve as a valuable guide for reallocating portfolios towards sectors with enduring potential. (Word count: 1,048)

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Which sectors are poised to gain currently? Shripal Shah, MD & CEO of Kotak Securities, explains - BusinessToday

Sectors Poised for Growth: Insights from Shripal Shah, MD & CEO of Kotak Securities