Beyond consumption and banking, which long-term themes will shape Indian equities over the next decade?

As markets swing between optimism and caution, investors are searching for clarity amid shifting earnings, global uncertainty, and volatile market performance.

In this interaction with BT, Shrikant Chouhan, Head of Research–Equity at Kotak Securities, explains the key factors driving Indian equities, including interest rate changes, consumer demand, foreign investor flows, and the major themes that could shape the next decade. Edited excerpts

Q). Do you feel the market is nearing the end of its rally, or can it continue to rise based on earnings and liquidity?

Shrikant Chouhan:  The market may be stuck between the positives of a stable macro, stabilising earnings and a likely strong recovery in earnings in FY27, and negatives of rich valuations and an uncertain global outlook. Retail sentiment continues to be optimistic but would need watching given dwindling trailing returns.
 
Q). Which sectors do you believe are entering a strong growth phase now, and which ones may slow down from here?

Chouhan: We expect a moderate pickup in consumption demand over the next few months driven by income tax cuts in the FY26 budget and GST rate cuts in September 2025, 100 bps rate cut by the RBI in early 2025, low inflation and a moderate increase in household income.
Exports of goods and services both will likely stay weak even if India and the US were to conclude a trade agreement. Street is expecting strong earnings growth in a large number of sectors in the second half of FY26.
 
Q). Foreign investors’ buying has been unpredictable. What global factors are you watching that could influence FPI inflows over the next few months?

Chouhan: We are closely monitoring four key global drivers that could shape FPI sentiment:
AI Landscape Evolution: The pace at which AI adoption and innovation is influencing tech valuations and capital flows, globally. Breakthroughs or regulatory shifts in AI could redirect investor interest toward markets with strong digital infrastructure and talent pools.

Trade Deals & Global Supply Chains: Any major trade agreements or disruptions in supply chains will impact global growth expectations. Positive trade developments can boost risk appetite, while protectionist measures may trigger caution among FPIs.

Dollar Index Movements: The strength of the U.S. dollar remains a critical determinant of FPI flows. A stronger dollar typically leads to outflows from emerging markets, while a softer dollar can make Indian assets more attractive.
Geo-Political Risks: Escalating conflicts, sanctions, or political instability in key regions can increase global risk aversion. Conversely, signs of stability or resolution could revive flows into emerging markets like India.
 
Q). Do you think earnings expectations for FY26 are realistic, or do some sectors still have room for upgrades

Chouhan: Q2FY26 results were a mixed bag and distorted by GST rate cuts. For FY26 we are realistic, and see no room for downgrades or upgrades.
 
Q). Beyond the usual sectors like consumption and banking, which long-term themes do you think will shape India’s equity market over the next decade?

Chouhan: Some sectors that could shape the equity market in the next decade could be Power, NBFCs, Platform companies like Zomato.
 
Q). How will changes in interest rates, both in India and globally, impact equity markets in the coming months?

Chouhan: Cut in interest rates in the US and India will lead to an expansionary policy positively impacting markets and economy.
 
Q). We are seeing a strong pipeline of IPOs. What should investors keep in mind while choosing between new listings in this market?

Chouhan: When evaluating upcoming IPOs, investors should focus on four critical factors:

Valuations: Check whether the IPO pricing is justified compared to industry peers and future growth prospects. Overvalued issues can lead to post-listing corrections, so look for a reasonable Price-to-Earnings (P/E) or Price-to-Book ratio and assess whether the company’s fundamentals support the premium.

Management Pedigree: The quality and track record of the leadership team matter. Strong governance, transparency, and a history of delivering on commitments are indicators of long-term stability. Review the promoters’ reputation and past performance in similar ventures.

Sector Outlook: Understand the growth potential and cyclicality of the sector. Is the industry positioned for structural growth, or is it vulnerable to regulatory changes and global headwinds? Favor sectors aligned with long-term trends like technology, financial inclusion, or renewable energy.

Balance Sheet Strength: A healthy balance sheet signals resilience. Look for manageable debt levels, strong cash flows, and efficient capital allocation. Companies with robust financials are better equipped to weather market volatility and deliver sustainable returns.