Deepak Shenoy, the founder and CEO of investment firm Capitalmind, has shared a cautiously optimistic outlook for the Indian stock market, advising investors to view every decline as a potential buying opportunity. However, he issued a strong warning about the stretched valuations in the fast-moving consumer goods (FMCG) sector.
Market Resilience and Selective Opportunities
Shenoy pointed out that the Indian markets have shown remarkable resilience over the past decade, maintaining a positive trend despite various geopolitical and economic shocks. He attributes this sustained performance largely to strong domestic liquidity, which has cushioned the impact of negative news. However, he cautions that a decade of continuous positivity is unusual and a corrective phase should be expected as part of the natural market cycle.
"I look at every fall as a purchasing opportunity for the future because everything that falls today and is good will give you much better returns tomorrow," Shenoy stated. He highlighted that the recent rally has been narrow, concentrated in a few top stocks, while the median performance across the Nifty and small-cap segments has been negative.
Valuation Concerns and the Growth Imperative
Discussing current market valuations, Shenoy was particularly critical of large FMCG companies, calling them "ridiculously expensive". He noted that these firms trade at valuations many times higher than in their home markets, partly due to limited free float in India. His core investment thesis hinges on growth: a company needs to grow at least 20% per year on average to command good valuations.
"If you don't have growth, no matter what your ROE, ROCE is, these metrics don't matter," he explained. He advised investors to wisely choose between stocks that are expensive but growing versus those that are expensive but stagnant, with the latter posing a significant risk.
Top Themes for 2026 and India's AI Path
Looking ahead to 2026, Shenoy remains bullish on several key themes. Artificial Intelligence (AI), semiconductors, and defence are at the top of his list. He also mentioned electric vehicles (EVs), nuclear energy, and space technology as significant growth areas. He believes defence will be a major focus with government involvement, while semiconductor manufacturing is seeing a surge in private investment.
On India's position in the global AI race, Shenoy is pragmatic. He believes India has not missed the bus but will follow a different trajectory. "We are the Lakshmi Mittals of the AI industry. We will pick up things when everybody else is going bankrupt," he said, drawing a parallel to the dot-com bust. He anticipates that after a potential bubble bursts in the US, Indian companies can acquire advanced technology at much lower prices in 3-5 years.
Commodity Cycle and Gen Z Investing
Shenoy expects a moderation in the commodity markets, especially for metals like gold and silver, which could see significant corrections if geopolitical tensions ease and supply from countries like Russia returns. He also commented positively on the investing behaviour of Gen Z, noting their smarter, long-term approach to mutual funds and their resilience during market shocks.
Disclaimer: This article is for educational purposes only. The views and recommendations expressed are those of the individual analyst. Investors are advised to consult certified experts before making any investment decisions, as market conditions can change rapidly.
