Raamdeo Agrawal On India Stock Markets, HDFC Bank Leadership Change: Indian equity markets may have reasons to remain cautious in the near term, with rising global bond yields, elevated crude oil prices and geopolitical uncertainty weighing on investor sentiment.
However, veteran investor Raamdeo Agrawal believes the domestic economy remains well placed to navigate the challenges, with corporate earnings, consumption, capital expenditure and the broader capital-markets ecosystem providing reasons for optimism.
Speaking in a special interaction with NDTV Profit, Agrawal said the pace at which US bond yields have been rising is a key concern for global risk assets. He also highlighted the simultaneous boom in corporate capital expenditure and government deficits as factors putting pressure on global bond markets.
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Bond Yields, Oil Keep Agrawal Cautious
Agrawal said the pace of the rise in US bond yields was concerning, describing the combination of a corporate capex boom and government deficit boom as a source of pressure on global bond markets.
According to Agrawal, the global economy may now be larger and potentially more capable of absorbing higher deficits than it was earlier, but the current bond-market movement does not offer an easy feeling and is “definitely not good for equity markets”.
He also flagged elevated equity valuations in the US as an additional concern, saying that when high government leverage, corporate leverage and elevated valuations come together, the risks become more major.
Agrawal said the situation could eventually require some adjustment, although it is difficult to identify the precise catalyst that could trigger such a change.
Oil prices are another major concern for India.
Agrawal said crude at around $105 a barrel was not yet enough to disturb his expectations for corporate earnings, but a move towards $110-$120 would clearly be negative for the economy and markets.
He noted that India is now in a stronger position to deal with an external shock, citing the buffer created through FCNRB-related measures and the country's reserves. However, he said the geopolitical situation, Iran, oil prices and the global bond-market sell-off remain key issues.
If the global bond sell-off continues, Agrawal expects Indian yields to also come under pressure, with repercussions for the domestic economy and equity markets.
Indian Economy Still On Strong Footing
Despite these global concerns, Agrawal remains positive about the underlying domestic economy.
He said corporate earnings are shaping up well, with expected growth of more than 15%, and argued that even crude at around $105 does not appear to have materially disturbed that outlook.
He pointed to the strength of the monsoon and domestic conditions as additional positives. While markets may remain “shaky”, he does not expect a major move until some of the global uncertainties ease.
His advice to investors, therefore, is to remain cautious rather than speculative.
Agrawal said investors should particularly avoid excessive leverage during periods of uncertainty.
“The best way to cut your risk in the market is to be unlevered,” he said, adding that investors who are further cautious could also keep some portion of their portfolio in cash.
At the same time, he sees uncertainty as potentially creating opportunities to pick stocks if individual companies or the broader market corrects.
Consumption, Capex And Manufacturing Stand Out
Agrawal said the combined impact of GST cuts and greater credit and liquidity availability was creating a strong environment for Indian businesses, particularly consumer companies.
“They never had it so good,” he said, describing the business confidence he has encountered.
He also highlighted a broader capital-spending boom spanning multiple themes.
According to Agrawal, the AI-related investment cycle is being accompanied by spending on defence and energy transition, all of which are capital-intensive. India is also seeing a GCC-related construction boom, creating opportunities for companies supplying capital goods.
The weaker rupee is another factor he believes is supporting Indian manufacturers with global ambitions.
Agrawal said he has come across companies with a large share of their business coming from overseas markets that are seeing strong demand and are struggling to handle the orders coming in.
Within manufacturing, he sees an opportunity in niche manufacturing with a global outlook, particularly where Indian companies can benefit from global customers looking for alternatives to Chinese suppliers.
However, he cautioned investors against simply buying an entire sector because of its growth prospects.
Instead, investors should examine a company's competencies, barriers to entry, scale, brand, technology, location and resources, he said. The key question is how long the current optimism can continue.
AI: Innovation Is Clear, Business Model Is The Question
Agrawal remains convinced about the importance of AI as a technological development but believes investors need to focus more closely on the business model that will ultimately generate earnings.
He compared AI with the internet, arguing that the internet fundamentally changed the world but did not itself represent a business model. Business models such as e-commerce emerged later as adoption and diffusion of the technology increased.
Similarly, he believes AI will stay and investment in the technology will continue, but the stock market ultimately needs to identify where the earnings will come from.
Agrawal said markets may currently be running ahead of themselves when it comes to the innovation aspect of AI.
“I don't have any doubts that it's a dramatic innovation,” he said, while questioning where the very large revenue numbers being discussed around AI will ultimately come from.
HDFC Bank Leadership Change: Agrawal Sees Sector-Wide Opportunity
On HDFC Bank, Agrawal described the bank as a “terrific franchise” and said the private banking franchise had been hurt by the uncertainty surrounding leadership transitions.
With expectations of a new CEO and MD at HDFC Bank, he believes the completion of the leadership transition could improve sentiment towards the bank and the broader banking sector.
Agrawal said the HDFC Bank franchise remains “intact and pristine” despite the stock having been heavily hit.
He also remains positive on banks over the next six to 12 months, pointing to what he sees as strong balance sheets and growth prospects.
He attributed some of the weakness in bank stocks to heavy foreign investor selling, noting that foreign institutional ownership had fallen considerably over a period of time.
Tata Sons Listing: 'A Good Thing' For Capital Markets
Agrawal also welcomed the possibility of Tata Sons eventually coming to the listed market.
He said having more large companies listed in India would be positive for the capital markets, adding that a Tata Sons listing would mean more business, greater investor interest and more research around the group.
He also believes it could lead to greater institutionalisation of holdings over time and potentially create additional value for shareholders of Tata Group companies.
More broadly, Agrawal sees the Indian capital-markets ecosystem becoming an industry in its own right.
He pointed to the growing number of large companies in the capital-markets space and said the industry is still relatively young.
“People have just walked into the party. Party is yet to happen,” he said, arguing that the next phase could bring better days once some of the current concerns around bond yields and geopolitics ease.
IPO Boom, SIP Flows And A Broader Capital Market
Agrawal does not see the large number of IPOs hitting the market as a major concern.
He described it as the “nature of the market”, pointing out that India's promoter ownership structure creates scope for secondary share sales when valuations and demand are favourable.
He believes the country's growing retail participation will be a major structural change over the next decade.
Agrawal said India currently has around 335 million demat accounts and expects that figure could reach around half a billion over the next six to seven years.
He also expects monthly SIP flows, currently around Rs 32,000-33,000 crore, to potentially rise to Rs 60,000-70,000 crore.
In his view, that would require considerably more investment opportunities and help broaden the country's capital markets.
Patience And Conviction: Agrawal's Investing Lesson
Asked about his biggest investing discovery of 2026, Agrawal returned to the importance of patience and conviction.
His point was that investors can have conviction that an asset or stock is undervalued and will eventually recover, without knowing when that recovery will happen.
The market can continue falling even after an investor has concluded that a stock is underpriced.
That is where patience becomes critical, he said.
For Agrawal, the lesson is that investors need to separate knowing what will happen from knowing when it will happen.
He believes investors should build conviction, buy when they find an opportunity they believe in and have the patience to wait for the market to recognise that value.
His broader message for the current market remains clear i.e. the domestic economy is doing well, but global bond yields, oil and geopolitics warrant caution.
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