Ajay Srivastava of Dimensions Consulting said India’s investment story focuses on oversold sectors rather than a broad market downturn. He expressed confidence in banking, noting, “We have seen the bottom with respect to banks.” However, he warned that high-growth segments like CDMOs now trade at very expensive valuation premiums.
India's investment story is increasingly about sectors that have been oversold rather than a broader market downturn, Ajay Srivastava, managing director of Dimensions Consulting, said in an interaction with NDTV Profit.
He also expressed confidence in the banking sector, saying the worst may be behind it, while cautioning that some high-growth segments are already trading at expensive valuations.
“We have seen the bottom with respect to banks,” Srivastava said, pointing to the continued performance of mid-tier banks.
He also highlighted the need for investors to reassess growth expectations and valuation premiums in select sectors, including contract development and manufacturing organisations (CDMOs).
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CDMO Valuations And Growth Expectations Need A Rethink
While the CDMO segment continues to perform well, Srivastava flagged elevated valuations as a concern. Strong business performance, he suggested, needs to be weighed against the prices investors are paying for future growth.
He also stressed that the time horizon and growth expectations attached to India's investment story need to evolve. This comes as investors navigate pockets of sectoral weakness alongside businesses commanding premium valuations.
The comments come against the backdrop of a mixed outlook for pharmaceutical companies in the September quarter, with domestic formulations emerging as a key growth driver even as US generics businesses face pricing pressure.
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Domestic Pharma Growth Offsets US Business Headwinds
According to Deven Choksey Research's Q2FY27 pharmaceutical preview, domestic formulations are expected to grow faster than the 10% growth recorded last year across its coverage universe. The Indian Pharmaceutical Market expanded 13% during the first two months of the quarter, supported by volume recovery and growth in chronic therapies.
Zydus Lifesciences, Sun Pharmaceutical Industries and Laurus Labs are among the companies expected to outperform the domestic market, according to the brokerage's assessment. The growing contribution of anti-diabetic therapies, including the GLP-1 opportunity, is another potential growth driver.
However, US generics remain under pressure from price erosion, declining Revlimid sales and competition. Cipla and Alembic Pharmaceuticals are among the expected laggards, while Cipla and Dr Reddy's Laboratories face margin pressures from US operations.
AI Rally May Not Last Forever
Srivastava also cautioned against assuming that the artificial intelligence-led market trend will continue indefinitely.
“AI trend to not last forever like any other trend,” he said.
His comments underline the importance of distinguishing between durable business growth and investment themes that may have already attracted excessive optimism.
For investors, the key may be identifying sectors where valuations have corrected sufficiently, rather than chasing themes solely on the strength of prevailing market narratives.
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