Where should equity investors bet? Mythili Balakrishnan of Alchemy Capital explains
All eyes are now on the next set of triggers that could revive momentum in the Indian equity markets, which has failed to generate returns for investors over the past year.
- Sep 15, 2025,
- Updated Sep 15, 2025 1:11 PM IST
All eyes are now on the next set of triggers that could revive momentum in the Indian equity markets, which has failed to generate returns for investors over the past year. As of September 12, 2025, the benchmark NSE Nifty 50 was down 1% year-on-year, while the broader Nifty Midcap 150 and Nifty Smallcap 250 slipped 2% and 7%, respectively.
So, where can investors find opportunities in this market? And what factors are likely to drive domestic equity indices going ahead? In an interaction with Business Today, Mythili Balakrishnan, co-fund manager, Alchemy Capital Management, shared her insights. Edited excerpts:
BT: Earnings growth was modest in FY25. What key factors do you believe could reignite momentum in the domestic stock markets?
Balakrishnan: Earnings, earnings, and earnings. Earnings growth remains the key driver for market performance. The Nifty 500’s adjusted earnings rose just 6% in FY25, a modest pace that has kept stock performance subdued. Looking forward, we expect earnings to accelerate, driven by GST rate cuts, tax relief, and a softer interest rate environment. We expect the Nifty 500 Index to perform in line with the improved earnings growth, supporting a positive outlook for the next 2-3 years.
BT: What global risks or tailwinds do you see as most influential in shaping investor sentiment today?
Balakrishnan: In our view, the most significant risks are US-centric trade disputes and persistent geopolitical conflicts worldwide. On the positive side, easing interest rates could bolster market sentiment.
BT: Which pockets will deliver a robust return to investors over the next 3 to 5 years?
Balakrishnan: We see multiple opportunities emerging in areas such as:
A) Manufacturing upcycle and investment: Companies benefitting in areas such as specialty chemicals, defence, and PLI-backed capex in electronics, auto/EVs, and semiconductors.
B) Energy transition: We see large opportunities in renewables, storage, grid modernisation, green hydrogen and the EV ecosystem. We expect beneficiaries to include utilities, engineering, procurement and construction companies (EPC), financiers, and equipment manufacturers.
C) Digital infrastructure and AI stack: We expect growth in data centres, cloud, fibre, 5G/6G, cybersecurity, and semiconductor design.
D) Financialisation of savings: Rising retail participation in equity markets supports structurally higher equity flows. Plays include AMCs, brokers, wealth/fintech platforms, and market infra providers.
E) Domestic consumption premiumisation: Staples to discretionary upgrade (QSR, beauty, alco-bev, durables), with rural recovery optionality.
F) Healthcare and pharma 2.0: Contract Research and Manufacturing Services (CRAMS)/ Contract Development and Manufacturing Organization (CDMO), complex generics, biosimilars, medtech exports, and hospital chains.
BT: Which sectors or companies stand to benefit the most with the recent GST rate cuts? How should investors position their portfolios?
Balakrishnan: The consumer discretionary sector would benefit the most, especially autos, consumer durables, stationery, and hotels. We also expect the cement sector to benefit from lower GST rates.
BT: Global investors have sold shares worth Rs 1.25 lakh crore in 2025 so far. What developments could encourage them to return?
Balakrishnan: We believe a rebound in corporate earnings, a rollback of US trade tariffs, and supportive domestic measures such as GST rate cuts, tax relief and a softer interest rate environment could revive FPI interest. More attractive valuations could also play a role in drawing back foreign investors to Indian equities.
BT: How do GST cuts, tax relief, and RBI rate cuts translate into a durable boost for consumption, investment demand and overall growth?
Balakrishnan: While the headline GDP growth of 7.8% in Q1FY26 exceeded expectations, primarily driven by the services and manufacturing sector, we believe that technicalities in the calculations might have inflated the number. On the ground volume indicators such as automobile volumes and FMCG volumes remain subdued. Further, net exports as percentage of GDP remain in negative territory, negating the theory about forced buying due to tariffs. We foresee a sustainable GDP growth trajectory of around 6-7%, supported by recent measures such as GST rate cuts, tax relief, and RBI rate cuts, which should bolster economic momentum going forward.
BT: What is your take on recently concluded Q1 earnings season?
Balakrishnan: Companies in the NSE 500 Index grew profits by around 10% in 1QFY26. The numbers mark an encouraging improvement in trajectory. Much of the momentum came from non-BFSI companies, especially the commodity sectors such as cement, steel, and oil and gas.
All eyes are now on the next set of triggers that could revive momentum in the Indian equity markets, which has failed to generate returns for investors over the past year. As of September 12, 2025, the benchmark NSE Nifty 50 was down 1% year-on-year, while the broader Nifty Midcap 150 and Nifty Smallcap 250 slipped 2% and 7%, respectively.
So, where can investors find opportunities in this market? And what factors are likely to drive domestic equity indices going ahead? In an interaction with Business Today, Mythili Balakrishnan, co-fund manager, Alchemy Capital Management, shared her insights. Edited excerpts:
BT: Earnings growth was modest in FY25. What key factors do you believe could reignite momentum in the domestic stock markets?
Balakrishnan: Earnings, earnings, and earnings. Earnings growth remains the key driver for market performance. The Nifty 500’s adjusted earnings rose just 6% in FY25, a modest pace that has kept stock performance subdued. Looking forward, we expect earnings to accelerate, driven by GST rate cuts, tax relief, and a softer interest rate environment. We expect the Nifty 500 Index to perform in line with the improved earnings growth, supporting a positive outlook for the next 2-3 years.
BT: What global risks or tailwinds do you see as most influential in shaping investor sentiment today?
Balakrishnan: In our view, the most significant risks are US-centric trade disputes and persistent geopolitical conflicts worldwide. On the positive side, easing interest rates could bolster market sentiment.
BT: Which pockets will deliver a robust return to investors over the next 3 to 5 years?
Balakrishnan: We see multiple opportunities emerging in areas such as:
A) Manufacturing upcycle and investment: Companies benefitting in areas such as specialty chemicals, defence, and PLI-backed capex in electronics, auto/EVs, and semiconductors.
B) Energy transition: We see large opportunities in renewables, storage, grid modernisation, green hydrogen and the EV ecosystem. We expect beneficiaries to include utilities, engineering, procurement and construction companies (EPC), financiers, and equipment manufacturers.
C) Digital infrastructure and AI stack: We expect growth in data centres, cloud, fibre, 5G/6G, cybersecurity, and semiconductor design.
D) Financialisation of savings: Rising retail participation in equity markets supports structurally higher equity flows. Plays include AMCs, brokers, wealth/fintech platforms, and market infra providers.
E) Domestic consumption premiumisation: Staples to discretionary upgrade (QSR, beauty, alco-bev, durables), with rural recovery optionality.
F) Healthcare and pharma 2.0: Contract Research and Manufacturing Services (CRAMS)/ Contract Development and Manufacturing Organization (CDMO), complex generics, biosimilars, medtech exports, and hospital chains.
BT: Which sectors or companies stand to benefit the most with the recent GST rate cuts? How should investors position their portfolios?
Balakrishnan: The consumer discretionary sector would benefit the most, especially autos, consumer durables, stationery, and hotels. We also expect the cement sector to benefit from lower GST rates.
BT: Global investors have sold shares worth Rs 1.25 lakh crore in 2025 so far. What developments could encourage them to return?
Balakrishnan: We believe a rebound in corporate earnings, a rollback of US trade tariffs, and supportive domestic measures such as GST rate cuts, tax relief and a softer interest rate environment could revive FPI interest. More attractive valuations could also play a role in drawing back foreign investors to Indian equities.
BT: How do GST cuts, tax relief, and RBI rate cuts translate into a durable boost for consumption, investment demand and overall growth?
Balakrishnan: While the headline GDP growth of 7.8% in Q1FY26 exceeded expectations, primarily driven by the services and manufacturing sector, we believe that technicalities in the calculations might have inflated the number. On the ground volume indicators such as automobile volumes and FMCG volumes remain subdued. Further, net exports as percentage of GDP remain in negative territory, negating the theory about forced buying due to tariffs. We foresee a sustainable GDP growth trajectory of around 6-7%, supported by recent measures such as GST rate cuts, tax relief, and RBI rate cuts, which should bolster economic momentum going forward.
BT: What is your take on recently concluded Q1 earnings season?
Balakrishnan: Companies in the NSE 500 Index grew profits by around 10% in 1QFY26. The numbers mark an encouraging improvement in trajectory. Much of the momentum came from non-BFSI companies, especially the commodity sectors such as cement, steel, and oil and gas.