Gold, silver long-term bets; wary of overvalued largecaps: Aditya Khemka of InCred AMC

Indian stock markets are witnessing wild swings of volatility recently on the back of feeble global cues. On this backdrop, Aditya Khemka, CIO at InCred Asset Management shares a cautious view on stretched large-cap valuations amid muted earnings growth, outlining sectors likely to outperform in the current earnings cycle in an E-mail interaction with Business Today.

He also explained his bullish yet selective stance on Indian equities, and discusses the structural case for gold and silver amid geopolitical uncertainty. Read the edited excerpts:
 

BT: What is your take on broader markets as benchmark indices scaled new highs recently? Do you think they offer valuation comfort over largecaps or still lack earnings visibility?

Khemka: Nifty 50 trades at a P/B of 3.6x compared to historical averages of around 3x i.e. a 20% premium. Whereas, historical average for Nifty EPS growth stands at 14% compared to current 8% (excluding commodities). Thus, we believe that the largecaps are overvalued given subdued earnings growth.
 

BT: As we are beginning the earnings cycle for the December 2025 quarter, which sectors may outperform and underperform? Do you see any surprises on either side for this quarter?

Khemka: We believe healthcare, autos and ancillaries and lending businesses would likely surprise positively on earnings growth and hence these stocks may outperform. We expect muted performance from IT, cement, cap goods, and industrials.
 

BT: Amid the rising geopolitical and tariff uncertainty, what are the key factors domestic and global that may guide the market movement for the new calendar year? What are your targets for Nifty and Sensex for 2026

Khemka: FTAs with various countries including the US could be a key trigger for the markets and FII flows reversing. However, we do not invest in such events. We invest in good bottom-up stories where valuations in conjunction with earnings make sense. We do not offer targets on Nifty or Sensex.
 

BT: Gold and silver were on a roll in 2025. What is your outlook for them in 2026 and how should an investor play this precious metal rally theme for say next 12-15 months. Are they a never sell asset or should early investors may consider booking some profits?

Khemka: We believe that central banks globally outside of the US and EU are de-dollarizing. This has increased the demand for Gold as a reserve asset and this demand seems to be structural. However, given the geopolitical turmoil, there may be some speculative buying of gold as well as a haven asset. This demand will be temporary and will decline if world trade were to normalize. Similarly for silver, the demand for silver as a store of value will be structural while the demand for the metal for industrial production purposes may vary. We believe both these metals should be a structural long-term holding, but prices will be volatile as speculative demand wanes.
 

BT: FIIs have remained sellers of Indian equities lately despite positive domestic economic data and GDP numbers. Do you think they will turn bullish on India's growth story this year and if yes, then when should one expect a rebound in their mood? How bullish are you on Indian equity markets?

Khemka: We are bullish on Indian markets. However, we do not share the broader optimism on everything in India. We believe there are pockets of the economy that will remain lackluster and pockets which will outperform. FIIs are currently withdrawing from India and other emerging markets as they see the current geopolitical situation warranting a risk off. the risk would set in as and when geopolitics settles.


BT: Which stocks/sectors are your top bets from large cap, midcap and small cap space? Do you see a sectoral rotation or shift this year?

Khemka: On the large caps we are bullish on PSU banks and large NBFCs. Sectoral rotation will happen from consumption-based businesses to healthcare and other secular businesses.