Manufacturing remains India's biggest investment theme, says Mahindra Manulife's Krishna Sanghavi

India's manufacturing sector continues to offer one of the strongest long-term investment opportunities, backed by government policies aimed at boosting domestic production, according to Krishna Sanghavi, Chief Investment Officer (Equities) at Mahindra Manulife Investment Management. He also remains constructive on financials, metals and selective IT stocks, while advising investors to watch regulatory developments in insurance and healthcare.

Sanghavi said initiatives such as the Production Linked Incentive (PLI) scheme, free trade agreements (FTAs) and import substitution are creating a supportive environment for manufacturers. He expects these policies to benefit not only industrial companies but also sectors linked to manufacturing, including financials and metals.

"Manufacturing is a big theme which we own," Sanghavi said. "The government is doing the right things to get the trade balance right... PLI on one side and free trade agreements on the other side."

On the recent rebound in information technology (IT) stocks, Sanghavi said price movements are increasingly being driven by global positioning around artificial intelligence (AI) rather than company fundamentals alone. He noted that leveraged global trades can amplify volatility in Indian IT stocks even when business fundamentals remain unchanged.

"The fundamentals might play out slightly longer, but the price impact can be much quicker," he said, adding that global shifts in AI sentiment have influenced Indian IT stocks in recent months. While Mahindra Manulife owns both largecap and midcap IT companies across its portfolios, he said allocations depend on fund mandates, with largecap valuations appearing more attractive while flows remain stronger toward midcap names.

Sanghavi also maintained a positive view on the banking sector, saying the distinction between private and public sector banks has narrowed considerably over the past five years.

"There is no conceptually a difference between liking a public sector or a private," he said, pointing to improvements in asset quality, digital capabilities and operating performance across public sector lenders. He believes investors should instead focus on individual banks' liability franchises, loan mix and return ratios.

Within metals, Sanghavi prefers ferrous companies, arguing they are better insulated from global volatility due to India's import protection policies and domestic demand. He said expanding manufacturing capacity will require greater domestic production of key raw materials, supporting long-term growth in the steel ecosystem.

On insurance, Sanghavi said investors should wait for the final regulatory framework before drawing conclusions. While Mahindra Manulife continues to hold PB Fintech in its portfolios, he believes the final rules could expand insurance penetration even if commission structures change.

"Let's wait for the final guidelines," he said. "It can make insurance more affordable... and increase the penetration for insurance as a product."

Discussing regulatory risks more broadly, Sanghavi said investors should avoid extreme positioning. Rather than exiting sectors entirely or taking oversized bets, portfolio sizing and valuation discipline remain the best tools for managing uncertainty.

He added that healthcare companies with diversified global operations are better placed to absorb any domestic regulatory changes, as overseas revenues can offset the impact of policy changes in India.

For the full interview, watch the accompanying video

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