India's market rally was overdue. Where does Helios MF's Dinshaw Irani see opportunities now?

The recent 1,200-point rally in the Indian stock market was overdue after nearly two years of underperformance, with improving corporate earnings providing fundamental support for the recovery, Dinshaw Irani, CEO of Helios Mutual Fund, told CNBC-TV18 in an interview.

Irani said India had underperformed emerging markets by 75% over the two years ended September 2026. India's weight in the emerging market index had fallen from 21% at the end of September 2024 to 10%, while Taiwan-based TSMC alone accounted for a 15% weight.

"I think the scepticism was overdone, and it's a mix of all these things you mentioned, including short covering. I think fundamentals are the big kicker for us," he said.

Irani pointed to strong corporate earnings in the June and September quarters, with a large number of companies reporting earnings growth in the high teens. He also welcomed the proposed reconsideration of long-term capital gains (LTCG) tax, saying it sent a positive signal to global investors that India was concerned about the performance of its markets.

Mid- and small-caps offer stronger earnings growth prospects

Helios Mutual Fund is carrying only 0.5-1% cash across its funds, with fresh investments largely being funded by daily inflows, Irani said.

The fund house is taking a selective approach to large-caps but sees better earnings growth prospects in the mid- and small-cap segments. Irani said recent quarterly results suggested that companies in these segments were delivering stronger earnings growth.

"The market is normally a slave to earnings growth, so we expect that segment to do well," he said.

He added that as money becomes more expensive, investors tend to chase growth. Helios is therefore focusing on identifying newer companies and emerging growth stories in the mid- and small-cap space, while selectively picking large-cap stocks where it sees earnings potential.

Why Reliance could benefit from refining margins

Irani said Reliance Industries was well placed to benefit from the global shortage of refining capacity, with its oil-to-chemicals (O2C) business likely to remain a key earnings driver.

He expects refined product crack spreads to remain strong even if crude oil prices decline as conditions in the Gulf region normalise. This, he said, could provide a significant boost to Reliance's business.

Irani also pointed to the stock's low ownership among investors and the recent value unlocking as reasons for renewed interest. However, he does not expect further value unlocking to act as a trigger for the company.

"We still own the stock (Reliance), but we didn't have as much weight as the index should have made us hold," he said, explaining the fund house's position.

New-age companies remain a multi-year investment theme

Irani also identified new-age companies as a key investment opportunity, pointing to India's digital ecosystem built around Jio, Aadhaar and affordable mobile data.

He sees this as a multi-year growth opportunity, particularly as Gen Z and Gen Alpha, who have grown up with mobile phones, become a larger part of the country's consumer base.

"I think that's a perfect play for India because that's one thing that we got right," he said.

Helios has taken considerable exposure to new-age companies and is actively tracking IPOs in the segment as it looks for further investment opportunities.