Ashwini Shami says power and power‑ancillary stocks are his top picks because they benefit from strong manufacturing demand and new investment in digital infrastructure, especially data centres.
He warns that chemical stocks are expensive at current prices and that consumer staples are a classic example of "capital imploders" – attractive on paper but likely to lose value.
Shami expects both the Reserve Bank of India and the U.S. Federal Reserve to keep interest rates unchanged at their next meetings.
He believes that developments in the West Asia crisis and the normalization of energy prices will be the main factors shaping medium‑term inflation and policy‑rate moves.
Investors should focus on earnings recovery rather than worry too much about geopolitical tensions, especially if oil stays below $100 a barrel.
Short‑term news headlines can distort market sentiment. Long‑term success comes from disciplined fundamental analysis that separates temporary noise from real changes in a company’s cash flow.
June‑quarter earnings show strong growth in banking, housing finance, power and business services. Banks posted mid‑ to high‑double‑digit growth in advances, led by MSME, retail and housing.
The consumer‑staples sector has lagged the broader Nifty 50 by about 30% over the past three years. P/E multiples for top firms fell from 60–80 times to 40–70 times, indicating overvaluation relative to an 8–10% growth outlook.
The IT sector’s outlook remains flat after June results. Revenue growth ranges from a 1.5% contraction to 3% growth in constant currency, and AI revenue is less than 10% of total.
Auto ancillaries and related segments are growing fast, but valuations are high. Shami still prefers power and ancillary stocks for their stable demand.
Chemical output fell 0.6% in April–June 2026. The Nifty Chemicals index trades at 47 times earnings, making the sector richly valued and risky for new investors.
Both the RBI and the Fed are likely to keep policy rates steady. U.S. inflation eased to 3.5% in June from 4.2% in May, while India’s core inflation stayed at 3.9%.
Geopolitical uncertainty remains a risk to inflation in both economies. How the West Asia crisis resolves and energy prices normalize will shape future policy decisions.
In summary, investors should stay cautious on chemicals and consumer staples, favour power and data‑centre stocks, and watch central bank meetings closely for rate signals.