India’s market rally needs earnings to catch up: Neuberger Berman’s Saldanha

Conrad Saldanha, Managing Director and Portfolio Manager at Neuberger Berman, believes that India’s equity markets are currently benefiting from several domestic tailwinds. Positive goods and services tax (GST) relief, good monsoons, and festive season demand have boosted sentiment, but as he cautions, “you got to sustain that, and it has to come through in earnings.”

At the same time, Saldanha stated that India’s valuation premium remains a challenge. Over the past 12 months, India has underperformed other emerging markets by nearly 20%, largely because valuations were already high while growth momentum softened.

Going forward, earnings growth must drive the next leg of the rally. Last year’s earnings per share (EPS) growth was only 5%, with this year expected to be around 10%, though Saldanha said that “it’s going to be more back-end loaded.”

For investors, broad-based rallies are giving way to stock-picking opportunities. The earlier systematic investment plan (SIP)-driven bull run is unlikely to repeat, making it essential to focus on quality domestic names in sectors such as industrials, manufacturing, and healthcare.

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One major investment theme, according to Saldanha, is the revival of capex. While government spending has slowed, private companies are stepping up with capacity expansion in metals and industrial equipment, creating triggers for earnings growth.

Within defensives, healthcare continues to offer opportunities. Hospital chains like Apollo Hospitals Enterprise and pharma players such as JB Chemicals & Pharmaceuticals are on his radar, as they combine operational efficiency with steady domestic demand.

On the technology side, Saldanha remains cautious. Large IT services companies face growth headwinds and disruption from artificial intelligence (AI), but niche IT players are showing resilience. Firms like Coforge, Persistent Systems, and Hexaware Technologies are executing well, even as the sector undergoes adjustment.

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Finally, Saldanha stated the importance of global AI and hardware-led investments. With hyperscalers and US companies pouring billions into graphics processing units (GPUs) and data centres, Indian firms aligned with electronics and hardware manufacturing could benefit over the medium term.

For the entire interview, watch the accompanying video

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