India equities turn to stock picking, Abakkus says

For investors, that means the old playbook of buying the index may be giving way to a more selective approach. The fund house said earnings growth has historically tracked nominal GDP over the past three to four decades, and that stock returns ultimately follow earnings expansion, making balance-sheet quality, addressable market and the ability to sustain growth more important than aggregate market levels.

The report pointed to opportunities in electric vehicles, cyber security, wealth management, asset management and medical tourism, many of which remain small- or micro-cap businesses today. It said these areas could benefit as India’s per-capita income rises and new sectors mature alongside the broader economy.

Near-term volatility from geopolitical tensions, higher crude prices, US interest rates and currency moves may keep traders defensive, but the report argued those factors matter less over a four- to five-year horizon than resilient corporate earnings. That leaves investors focused on the next earnings cycle, with selective exposure likely to outperform broad bets if India’s growth story continues to translate into profits.