Indian equities may return 12-13% in Samvat 2083, says Bandhan AMC’s Manish Gunwani

Indian equities could offer returns of around 12-13% in Samvat 2083, but investors may have to navigate a challenging period over the next two to three quarters, according to Manish Gunwani, CIO – Equity, Bandhan AMC, which manages assets worth around $180.76 million (₹1,714.61 crore),

Gunwani said, “Three-five-year perspective, I think we will make decent money in equities, but I do think that next two three quarters are not going to be very peaceful honestly."

While valuations have become more attractive, Gunwani said macroeconomic challenges, including crude oil prices, monsoon conditions, geopolitical developments and the growing impact of artificial intelligence (AI) could keep markets volatile.

He expects large-cap earnings to grow in line with nominal GDP growth of around 10-11% over the medium term. Gunwani believes investors should look beyond near-term market movements and focus on companies that can deliver sustainable growth over the next three to five years.

Gunwani sees manufacturing exporters as an important investment opportunity over the next three to five years. He believes India's services export growth could moderate as AI adoption increases and the country becomes more dependent on overseas computing infrastructure.

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The growing use of AI could also lead to higher services imports, as the computing infrastructure used for AI is largely based in the US and China. This could put pressure on India's net services exports and increase the need to strengthen manufacturing and merchandise exports.

Within manufacturing, he highlighted pharmaceuticals, textiles, automobiles and engineering as sectors with potential. However, he cautioned that valuations across several manufacturing companies are already elevated, making stock selection important.

Manufacturing businesses also tend to require significant capital and working capital, which can weigh on their return on equity compared with asset-light services businesses. Investors, therefore, need to be selective and look for companies available at reasonable valuations.

Gunwani also sees opportunities in private bank stocks, saying several could deliver low double-digit annual returns over the next three to five years because of their attractive valuations.

The other themes on his radar are premium consumption and internet platforms. Gunwani believes companies with technology-oriented management teams could benefit from the adoption of AI, particularly through lower operating costs and more efficient customer acquisition.

Gunwani also remains positive on gold as a portfolio investment, given the possibility of increased money printing globally and negative real interest rates in major economies.

He believes countries such as Japan and those in Europe may have to resort to money printing and maintain negative real interest rates to manage their economic challenges.

Unlike equities, gold does not have earnings or cash flows that can be used to determine its valuation. However, Gunwani sees it as a reflection of global money printing and believes it continues to have a place in investors' portfolios.

For the entire discussion, watch the accompanying video

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