Anand Rathi Wealth's Joint CEO Feroze Azeez expects banking stocks to outperform the broader market over the next three years, while FMCG could emerge as an investment opportunity following its recent underperformance. He remains optimistic about Indian equities, citing foreign institutional investor (FII) inflows, attractive banking valuations and improving economic prospects.
Speaking to NDTV Profit, Azeez said the recent rally in Indian equities was largely driven by short covering after foreign investors maintained unusually high bearish positions in index futures for several months.
According to Azeez, nearly 91% of FII index futures positions were short, with bearish positioning remaining above 80% for 14 consecutive months — an unprecedented trend in his data tracking since 2021.
He said positive developments surrounding potential long-term capital gains (LTCG) tax changes triggered short covering, accelerating the market's recovery.
Azeez also expects November to witness positive foreign inflows, supported by the MSCI index review. He cautioned against drawing conclusions about the sustainability of the rally before the complete monthly FII flow data becomes available.
Banking Stocks Could Outperform Nifty
Azeez remains particularly bullish on the banking and financial services sector, citing attractive valuations and the likelihood of renewed foreign investment.
He noted that several banks are trading one to two standard deviations below their historical average valuations, measured across parameters such as price-to-earnings and price-to-book ratios.
Azeez sees over a 90% probability of the Nifty Bank outperforming the Nifty 50 by 3–5 percentage points annually over the next three years.
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FMCG Stocks Offer Fresh Opportunity
After turning bearish on FMCG stocks in July, Azeez believes the sector's recent underperformance has created an attractive entry opportunity.
He noted that the Nifty FMCG index has underperformed the benchmark by approximately eight percentage points since his July 30 call.
Azeez now expects the sector's underperformance to be largely behind it and sees potential for recovery over the next six to twelve months.
Moody's GDP Upgrade Reinforces Long-Term Outlook
Commenting on Moody's decision to raise India's GDP growth forecast to 7% from 6.5%, Azeez said the upgrade strengthens India's long-term investment case.
He explained that markets are driven by news in the short term, corporate earnings in the medium term and economic growth over longer periods.
Azeez believes India's economic resilience supports a positive outlook for equities over the next three to five years, although near-term market movements will continue to depend on other factors.
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