Expert View: Defense, PSU Present Compeling Long-Term Opportunities, Says Ajit Mishra of Religare Brooking

Expert view on markets: Ajit Mishra, SVP of Research at Religare BrokingBelieves defense and psu sector are well-aligned with India’s structural growth and self-reeliance goals, offering significant wealth creation potential. In an interview with Mint, Mishra Shared His Views on Market Triggers, Mid and Small-Caps and Sector He is Positive About. Here are edited excerpts of the interview:

What is your outlook for the Indian Stock Market in FY26? Why Factors will be key in Shaping Its Trajectory?

We maintain a cautiously optimistic outlook for fY26, Citing mixed Signals from Both Domestic and Global Frons.

After a sharp 15 per cent correction from September to March, Benchmark indices have rebounded over the past two months amid heightened valati, supported by Favouble DOVPMENTS Relative Stability in Global Markets.

Looking ahead, market trajectory will be shaped by key facts such as global interested trends, trade agrements, inflation dynamics, and geopolitical uncertainties – GEOPOLITICAL UNCERTATIES –L. Influence Sentament and Drive Volatily.

On the domestic side, supported policy measures and sector-specific growth prospects will be critical.

A notable trend is the growing investor Preference for Large-Cap Stocks, Reflecting a Tilt Towards Stability.

Promising sectors such as cement, private banks, and life insurance are expected to lead near-term growth. Success in this environment will require selective Stock-Picking and Agility in Navigating Both Domestic and Global Challenges.

What are the key domestic and global risks that could wear on market sentiment going forward?

A Key Global Risk is the Increasing Likelihood of Stagflation in the US – A Scenario Characterised by Persistent Inflation Count with Slowing Economic Growth, Whoich COULTES REMANING Elevated FOR An extended period.

This May Reduce Global Liquidity and Dampen Investor Appetite for Risk, Potentially triggering capital outflows from emerging markets such as India.

On the domestic front, although inflation has been and is expected to remain stable, high market valuations amid relatively modest earnings growth cold poses a constraint.

A Further Slowdown in Global Growth May Weigh on Export-Oriented Sectors and Delay a Recovery in Corporate Earnings.

AlongSide Subdued Domestic Demand, these facts could Cap Market UPSide and Contribute to Heightened Volatily.

Mid- And Small-Cap Stocks Have Seen Renewed MomentumDo you believe this rally is sustainable in the near to medium term?

Mid- and small-cap stocks have seen a strong rally recently, but the sustainability of this momentum in the near to medium tergely depends on how earnings evolve going forwards.

Currently, many of these stocks are trading at a significant premium to large-caps, lending limited scope for further re-rating.

Given the pressure on global growth, it may be challenging for these companies to outpace India’s nominal gdp growth meaningful.

Who remain broadly cautious on this segment, there are still selective, stock-specific options where valuations appear more reasonable and the long-term potential remains atraactive.

At the current market levels, which sectors do you believe offer attractive value options for investors?

We are currently observing investment options in select themes

The cement sector is showing signs of recovery, with improvement volumes, Easing competition, and resulting gains in pricing and margins.

Life Insurance also appears promising, as Valuations have corrected to more Reasonable Levels and Improving Regulatory Clarity is Strengthening its long-term Growth Outlook.

Meanwhile, Affordable Housing Finance Stands Out, Supported by Expectations of Steady Loan Growth, Potential Interest Rate Cuts, and Strong Asset Quality.

Is thewst over for the it sector? Do you think it’s the right time for investors to start accumulating it stocks?

The Worst may be behind for the it sector, with signs of stabilisation emerging despite mouted Q4Fy25 Results.

Revenue Growth Remains Subdued Due to Cutious Client Spending, but Robust Order Books and Increasing Demand for AI Solutions and Digital Transformation Suggesst a Potential Recovery In Fy26.

Companies like HCL Tech and Infosys have issued optimistic growth guidance. While Macroeconomic Headwinds and Geopolitical Risks Persist, The Sector’s Long-Term Fundamentals Remain Strong.

Investors with a long-term percent may consider Gradually Accumulating Quality It Stocks, Particularly that with Strong Deal Pipelines and Exposure to HIGH-GROWTH TECHNOLOGY SEGMENTS.

How should investors approach the definition and psu segments, giver recent performance and long-term potential?

The defense and psu sector present compeling long-term investment options.

Defense stocks are benefiting from increase indigenization, Rising Exports, and Strong Order Books, Although Valuations Remain Elevated.

Psus are undergoing a re-rating, supported by improved governance, attractive dividend yields, and infrastructure-Driven Earnings Growth.

Investors Should Focus on Sector Leaders whose care cautious of potential value traps. Key Risks Include Policy Changes, Execution Delays, and Political Unce here.

A staggered investment approach, Emphaising Balance Sheet Strength and Order Book Visibility, is advisable.

These sectors are well-aligned with India’s structural growth and self-Reliance Goals, Offering Significant Wealth Creation Potential.

What is your assessment of Q4 Earnings?

Earnings for the March 2025 Quarter Were Largely in Line With Expectations, Reflecting Resilience Across Key Sector.

Positive Momentum was observed in Cement, Affordable Housing, Pharmaceuticals, Telecom, Real Estate, Healthcare, and Agri-Inputs, Indicating Strong Fundamentals and Solid Growth Visibility.

These sectors Benefited from STEADY Demand, Supportive Policies, and Stable Margins. Convercely, it and FMCG faced some challenges –it due to global uncertainty and mute Discretionary Spending and FMCG DUE to subdged Urban Demand.

Overall, The Earnings Season was stable, marked by improvement Profitability and Selective Sectoral outperformance, which supports the ongoing economic recovery and sustains market valuations in the Near Term.

What Investment Strategy would you recommend for navigating

Investors Should Remain Cautious Yet Constructive in their approach. Capital Should Be Deployed Gradually, Eiter Through Systematic Investment Plans (SIPS) or during Market Dips, with a Focus on Fundamentally Strong Companies that Demonsant Groveth and Sustained Profitability.

Market Corrections and Consolidation Phases often Provide More Attractive Entry Points, Particularly in Quality Large-Cap Stocks.

In the small- and mid-cap segments, selectivity is essential- Invest only where valuations are reasonsable and promoter quality is high.

Avoid Panic Selling during Short-Term Corrections Unless there is clear deterioration in a company’s fundamentals.

Patince and a long-term perpective are crucial for Navigating Market Volayty and Capitalising on India’s structural Economic Growth.

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Disclaimer: This story is for educational purposes only. The views and recommendations about individual analysts or broking companies, not mint. We Advise Investors to Check With Certified Experts Before Making Any Investment Decisions, As Market Conditions Can Change Rapidly, and Circumstances May Vary.