Direct Equities: Buy on dips with a long-term view in volatile market

Earnings momentum remains healthy — early results beating expectations, led by Metals & Commodities. Long-term outlook for Indian equities remains constructive, supported by an expected recovery in earnings growth in FY27, a resilient domestic investor base, and continued macro stability. Structural drivers such as manufacturing expansion, domestic consumption boost, and policy continuity are expected to underpin growth over the next 12–18 months. IIP growth was steady at over 4% for the second month in a row. Manufacturing sector responding positively (PMI expanded to 59.2 from 57.7 in Sep) to the GST cuts, as demand appears to have picked up. Fed’s guidance of no additional rate cuts in 2025 eases pressure on the RBI to cut rates, helping prevent further weakness in the Indian rupee. Key risks include global monetary tightening, geopolitical uncertainties, and potential foreign portfolio outflows given the strong performance of global markets like Japan, South Korea, US, China, etc.

Highlights

• Equities to be in ‘buy-on-dips' mode amid a robust outlookpost H1FY26 results; accumulate selectively with an18-24 months perspective
• Gold prices were up by 3.7% in Oct and up 21.7% in the last six months.
• The Manufacturing sector responded positively (PMI expanded to 59.2 from 57.7 in Sep) to the GST cuts, as demand appears to have picked up. Fed’s guidance of no additional rate cuts in 2025 eases pressure on the RBI to cut rates, helping prevent further weakness in the Indian rupee.
• Sectors: (1) BFSI & IT offer favorable risk-reward balance (2) Selective plays in Metals, Power, Chemicals and Realty-proxy sectors (3) Potential tactical plays - Media, Auto, US-exposed manufacturing and Telecom (4) On the sidelines – Pharma/Infra/Energy on the back of growth uncertainty and industrials, defense and FMCG due to scope of deceleration in earnings and punchy valuations.