From defence to chips: DSP MFs Vinit Sambre on where investors should look next

India’s economy is holding steady even as the world faces volatility. Corporate earnings are slowly picking up, and recent steps by the government—like GST rate cuts and better liquidity—are giving markets some support. At the same time, global risks such as trade tariffs and currency swings are keeping investors on the edge. So, where should they focus now? In this exclusive conversation with BT, Vinit Sambre, Head of Equities at DSP Mutual Fund, talks about the impact of global risks, the outlook for PSUs, and the sectors showing promise. He also highlights new long-term opportunities, and how India’s rating upgrade may shape investor confidence. Edited excerpts.
 
Q. How do you see the Indian equity market positioned amid global volatility?

Vinit Sambre: Indian markets have underperformed global peers in the past year, and the valuation premium over emerging markets has narrowed. Recent RBI and government measures—such as improving liquidity, lowering interest rates, and rationalising GST—should support corporate earnings, which were muted over the last twelve months.
Our long-term view on equities is constructive, but investors must recognise that returns may be more back-ended. Earnings growth is expected to pick up gradually, requiring patience. Global volatility will likely remain a constant, and businesses must continue strengthening competitiveness to withstand multiple headwinds.

Q. Which sectors are best placed to benefit from the current economic environment?

Sambre: We see resilience across several businesses. Life insurance, hospitals, select NBFCs, telecom, and agri-inputs are either sustaining solid growth or bouncing back strongly. Banking looks promising, with lower interest rates aiding margin recovery. Consumer demand, previously subdued, should revive thanks to GST rationalisation, tax benefits, and lower borrowing costs. Additionally, the power sector is entering a significant capex cycle, and companies linked to this expansion should benefit meaningfully.
 
Q. What is your outlook for PSU stocks, especially banking and defence, over the next 2–3 years?

Sambre: PSU banks are reasonably valued today, but their performance will depend on how they manage asset quality. If no major stress emerges, their inexpensive valuations could support solid returns.
In defence, strong order momentum has driven current valuations. While these stocks aren’t cheap, continued execution of large order books and disciplined working capital management will be key. Any slowdown in inflows or deliveries could pose risks. Overall, both banking and defence PSUs hold opportunities, but disciplined execution and prudent risk management will be crucial over the next few years.
 
Q. What global risks or tailwinds are most important for shaping investor sentiment?

Sambre: The biggest risk right now is the evolving US tariff situation. Beyond the direct trade impact, tariffs could fuel US inflation, slow its economy and spill over into global markets. For India, this raises risks of currency depreciation and export pressure, especially in labour-intensive sectors like textiles and gems & jewellery. That, in turn, could dampen the recovery in domestic consumption. So, while India has strong domestic tailwinds, global tariff uncertainty remains a significant external risk.
 
Q. What are the next big opportunities in India’s capital markets over the next 3–5 years?

Sambre: One of the interesting areas is the emerging semiconductor value chain. We are beginning to see concrete activity here, with companies showing interest in building capacity and capability. While it is still early and unclear which players will ultimately capture the most value, this space has the potential to become a meaningful investment opportunity over the next 3–4 years as domestic manufacturing gains traction.

Another major theme is the energy transition. With climate challenges becoming more pressing, large-scale investments are being directed toward renewables, storage solutions, green hydrogen, and grid modernisation. This ecosystem is likely to produce strong, scalable businesses that could shape the next wave of growth in India’s markets.
We also remain constructive on the auto sector, where structural shifts are underway. Technology upgrades, electric vehicles, and frequent new product launches are reshaping consumer preferences. Autos are likely to remain a key beneficiary of rising discretionary spending, capturing a decent share of household wallets.

Beyond these, we expect financialisation of savings to continue as a long-term theme, with increasing household participation in equities, insurance, and other financial products. Additionally, healthcare and related services remain a strong secular story given India’s demographics, rising incomes, and better health awareness.

Q. How will India’s recent rating upgrade impact FPI inflows and equity valuations?

Sambre: The upgrade is a clear positive and gives foreign portfolio investors (FPIs) more confidence. But sustained inflows will depend on earnings growth rather than the rating alone.
India’s valuation premium has narrowed due to recent underperformance. As policy measures—liquidity support, tax benefits, and GST cuts—translate into stronger earnings, we expect foreign interest to revive. However, clarity on the US tariff front will remain critical for sentiment.