The recent correction also made room for a short-term rally. Now, with market valuations back to earlier peaks, further movement will depend on upgrades to earnings forecasts for the fiscal year 2025-26 (FY26) and 2026-27 (FY27). Until then, he expects the market to remain stable within a range.
Kumar also noted an increase in risk appetite. Small and mid-cap stocks have outperformed largecap stocks recently, but a broader market move would still need stronger earnings support.
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On sectors, Kumar said Axis MF remains overweight on pharmaceuticals and healthcare. “As that clears up and expectations — there is more visibility around that — that sector should continue to do well,” he said, referring to past uncertainty, especially in the US policy space.
Growth stocks have been under pressure over the past few months. “Markets penalised growth stocks,” he said, mainly due to uncertainty from the US and concerns around tariffs. However, he expects the market to return to growth, especially as 2025-26 and 2026-27 estimates stabilise. He continues to look at growth and quality as key themes.
Within sectors, financials remain another focus area. Axis MF has exposure to both large private banks and non-banking financial companies (NBFCs). Kumar added, “Each of these buckets offers their strengths,” noting capital market firms also present opportunities, though valuations are more selective now than earlier in the year.
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In contrast, Axis MF is underweight on consumer-focused sectors, including staples and discretionary. “The earnings environment continues to remain tepid,” he said, though he expects improvement later in the year.
On technology, Kumar said the fund’s positioning is mostly neutral to slightly underweight, depending on the fund mandate. He described it as a “bottom-up stock play,” with a focus on specific midcap and largecap names. He added that the sector had already seen corrections, and current expectations are low, offering a potential base for recovery.
On pharma specifically, the fund is looking at companies focused on generics and APIs in the US, as well as some hospital names and domestic-focused firms.
For the full interview, watch the accompanying video
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