Despite recent surges, Indian equity markets remain under pressure, making active stock selection more critical than ever, according to Sonam Srivastava, founder of Wright Research. While valuations suggest the market may be nearing a bottom, overall euphoric growth is not anticipated, prompting a need for selective investment strategies.
Markets & Valuations: A Mixed Outlook
Investors received a temporary boost around Diwali, with benchmark indices showing significant gains on November 5, 2026, extending into the following day. The BSE Sensex jumped 2,000 points and the Nifty 50 surged 576 points on Thursday, driven by gains in the US midterm elections and cooling crude oil prices. However, these indices were still down over 6% year-to-date at the close of November 5, with flat returns since January 2025.
Srivastava notes that Indian market valuations are currently attractive, especially when compared to other emerging markets or historical Indian values. Despite this, she cautions that further declines are possible before a sustained recovery. Key drivers for future market direction include foreign institutional investor (FII) sentiment and the potential unwinding of the AI trade, which could refocus attention on Indian markets.
The Importance of Active Stock Selection
While FIIs invested Rs 22,693 crore in India's equity market up to November 5, 2026, they remain net sellers for the year, with outflows exceeding Rs 2.72 lakh crore. Srivastava emphasizes that India as a whole may still present a challenging investment landscape, with sectors like fast-moving consumer goods (FMCG) having underperformed. Therefore, she advocates for a highly selective approach to investing.
"Active investing in that regard in India might be the better way to look. There are pockets of growth in India. I don't see a reason for overall euphoric growth. But selective stock selection would be quite powerful," Srivastava told Business Today.
Promising Sectors for Growth
The September-quarter earnings season has offered some positive signals, particularly outside the IT sector, which is seeing a shift due to growing AI use cases. Many small- and mid-cap companies have delivered strong earnings. Srivastava highlights several sectors with significant potential:
- Industrial Companies: These firms are benefiting from robust order books, signaling future growth.
- Pharmaceuticals: Constituting almost 30% of Wright Research's portfolio, this sector—including CDMO (contract development and manufacturing organisation), API (active pharmaceutical ingredients), and hospitals—is showing strong earnings.
- Financials (Banks): Despite recent selling pressure from FIIs, banking stocks are fundamentally sound, exhibiting decent credit growth and manageable balance sheet pressure. Rising interest rates are also expected to benefit the financial sector.
External Factors and Gold Outlook
Srivastava also points to external factors that could influence the market. Elevated crude oil prices, if sustained for several quarters, could negatively impact consumption and FMCG companies, potentially necessitating further policy support. Regarding gold, she notes a cooling-off phase after recent peaks. While short-term predictions are difficult, the long-term outlook for gold remains positive, supported by central banks globally increasing their reserves.