India’s market valuations more reasonable, domestic sectors likely to outperform: Report

New Delhi, June 15 (IANS) India’s market valuations have become more reasonable after a correction, particularly in large caps and select cyclical sectors, a report said on Monday.

The report from Axis Mutual Fund said domestic‑facing sectors such as banking, capital goods, manufacturing and selective consumption themes are preferred over global‑facing sectors like information technology.

Mid‑cap and small‑cap segments have remained resilient supported by strong domestic liquidity and selective earnings visibility. The report added corporate earnings remained healthy but the outlook softened as FY27 earnings downgrades increased amid rising global uncertainties and cost pressures.

The report noted that US-Iran conflict’s impact is sector‑specific with upstream energy players to benefit from elevated prices while downstream oil marketing companies face margin constraints.

Sectors with high fuel dependence, including aviation, logistics, and transportation, face immediate cost pressures. Other segments such as autos, pharmaceuticals, and industrials are affected more indirectly through higher raw material costs and weaker demand sentiment.

Indian equities faced pressure due to geopolitical tensions and crude oil volatility, with benchmark indices declining during the month. In May, the benchmark indices declined, with the BSE Sensex and Nifty 50 falling 2.8 per cent and 1.9 per cent, respectively.

On fixed income, the fund house said the 10-year G-Sec yield is expected to trade in the 6.75 per cent–7.10 per cent range during the second half of 2026, while favouring short-duration and accrual-focused strategies.

Bond yields remained volatile, easing briefly on softer crude prices before moving back up as geopolitical tensions in West Asia persisted.

RBI kept the repo rate unchanged at 5.25 per cent and maintained a neutral stance while introducing measures to attract foreign capital into debt markets.

Inflation remains relatively contained at around 3.5 per cent, but risks remain from higher crude prices, weather-related disruptions and food inflation.

Structural drivers such as potential inclusion in global bond indices, FCNR(B) deposits and ECB inflows could support foreign investments into Indian debt markets.

—IANS

aar/pk