Hold equities, not cash; autos & largecap IT offer opportunities, says V Srivatsa

Despite heightened global uncertainties, including tariff-related risks, India’s domestic equity markets are positioned more favourably for the next 12 to 18 months, according to V. Srivatsa, Fund Manager and Executive Vice President at UTI AMC.

In an interview with ET Now, Srivatsa noted that while global concerns—particularly around US growth, interest rates, and additional tariffs—pose risks, the domestic economy is showing signs of resilience. “Domestic consumption seems to have bottomed out, aided by GST rationalisation and lower corporate tax rates introduced in the last budget. These should reflect positively in the coming quarters,” he said.

Srivatsa believes India’s markets are entering a more balanced phase where selective accumulation, especially in autos and IT, could deliver steady returns even amid global headwinds.

India’s markets, which have been among the worst performers over the last year due to high starting valuations, earnings cuts, and global volatility, could stabilise if trade tensions ease. However, Srivatsa warned that if additional tariffs persist for more than a couple of quarters, it could create collateral damage for export-linked sectors such as textiles, gems and jewellery, with ripple effects across the ecosystem.

Not the time to sit on cash

On the investment outlook, Srivatsa advised against sitting on cash. “Valuations are not cheap, but they are in the fair-value zone. With steady global and strong domestic retail flows, there is no case for a meaningful correction. Investors can gradually accumulate equities or consider hybrid products that balance debt and equity,” he suggested.

Highlighting sectoral opportunities, Srivatsa named automobiles and largecap IT as his top picks. “Autos have faced pressure across segments in the past year, but GST reforms and reasonable valuations make it an attractive bet. Largecap IT, meanwhile, is trading at compelling free cash flow yields of 4-6%, offering strong entry points, particularly during periods of market volatility,” he said.

On consumption-driven sectors such as FMCG, he struck a more cautious tone, citing expensive valuations despite weak earnings growth over the past three to four years. “We need some correction in valuations before turning constructive on FMCG,” he added.