Not the time for concentrated bets, thematic funds: Mirae's Neelesh Surana

With the January–March 2024–25 earnings season drawing to a close, Neelesh Surana, chief investment officer at Mirae Asset Investment Managers (India), tells Puneet Wadhwa in an email interview that they expect around 12 per cent earnings growth over the next two years, driven by banking, financial services and insurance (BFSI), metals, telecommunications (telecom), and a revival in consumer sectors. Discretionary segments, he believes, may rebound as interest rates fall, rural incomes improve, and the government steps in with measures such as tax cuts and the Eighth Pay Commission. Edited excerpts:

 

Are global markets over-optimistic about the macro outlook? How might central banks respond?

 

Developed market central banks face structural constraints — including rising fiscal burdens, high debt, and ageing demographics — that limit policy flexibility. While caution on global growth is warranted, India’s macro fundamentals remain strong, both in terms of growth and cost of capital. The India–US 10-year yield differential is now at a 20-year low, reflecting India’s relative macro strength.

 

Do Indian markets lack upside triggers? Can earnings justify valuations?

 

Valuations seem reasonable, with earnings stabilising. At 17x estimated 2026-27 earnings, valuations are fair given the low cost of capital, except in a few narrative-driven sectors. We expect around 12 per cent earnings growth over the next two years, led by BFSI, metals, telecom, and a revival in consumer sectors. Discretionary segments may recover as rates fall, rural incomes rise, and government support, such as tax cuts and the Eighth Pay Commission, materialises.

 

What’s your view on mid and smallcap stocks? Are they worth considering now?

 

Mid and smallcaps have grown in both scale and sector diversity. The largest midcap is now seven times bigger than it was a decade ago. New listings, formalisation, and fund flows have widened the investable universe. So even if only a third are reasonably priced, there’s still a broader base to explore. The recent correction has created selective opportunities. A bottom-up, quality-focused approach remains essential. 

 

Will domestic institutional investor (DII) flows outpace foreign institutional investor (FII) flows in 2025?

 

Yes. DII flows are now more consistent, meaningful, and predictable. While FIIs may return selectively, DIIs have become the more dominant force. That said, FIIs have bought over $5 billion in the past two months, reversing the earlier outflow trend. This shift has been driven by a weaker US dollar, India’s relatively lower exposure to tariff headwinds, and fair valuations. Still, the market narrative is largely shaped by domestic investors, with DIIs adding a sizeable $65 billion over the past year — a trend we expect will continue, overshadowing FII flows.

 

SIP flows have thinned recently. Are investors ignoring long-term advice?

 

SIP stoppages have risen slightly, but the broader trend remains healthy. Some investors may be booking profits or reacting to volatility. Still, the long-term advantages of SIPs are well recognised, particularly the discipline to invest during market corrections. Staying invested through cycles remains the most effective approach.

 

What’s your advice for first-time investors entering equities directly?

 

In general, we don’t recommend direct investing. However, a core-satellite approach can work: allocate 50–75 per cent to mutual funds and the rest to 10–15 familiar stocks. Focus on understanding businesses — their value, not short-term price movements. Track what you own and diversify across sectors to manage risk and build investment discipline.

 

Should investors from the past 12–24 months rebalance towards a concentrated or diversified portfolio?

 

Given the lack of clear sector over- or undervaluation, this is not the time for concentrated bets or thematic funds. A diversified portfolio is more appropriate, balancing participation with risk management.

 

Will passive investing gain more traction amid uncertainty?

 

Passive investing continues to grow due to its cost efficiency and simplicity. However, India’s market inefficiencies still offer alpha, thanks to a dynamic economy and proven active fund performance. Growing divergence within and across sectors also supports active strategies.

 

How are you positioning portfolios amid Trump/geopolitical risks?

 

On tariffs, the impact is likely to be limited given India’s smaller export base and improving competitiveness. More broadly, our portfolio remains anchored in quality, valuation discipline, and diversification. We avoid reacting to news cycles, focusing instead on fundamentally strong businesses. In volatile environments, structured stock-picking and a diversified template matter more than trying to predict macro events. 

The price of promise: Hunting value in a valued market

 

*   Valuations at 17x FY27 seen as fair — barring frothy narrative-led pockets

 

*   Earnings growth pegged at 12% over two years

 

*   BFSI, metals, telecom driving the rebound

 

*   Consumer demand picking up; discretionary may follow

 

*   Tailwinds: Rate cuts, rural income boost, tax breaks, Pay Commission