Indian Stocks Tipped for Comeback as Earnings Growth Looms

As of September 10, 2025, the Indian stock market is in a wait-and-watch phase, but earnings growth could be the key trigger for a strong comeback, according to Aditya Sood, Portfolio Manager at InCred Asset.

Sood believes global and domestic factors are aligning well to support the Indian markets. With the US Federal Reserve expected to cut interest rates, the global cost of capital is likely to ease, creating a favorable environment for India. Additionally, the spread between US and Indian 10-year bonds is at a record low, further bolstering the market's prospects.

Over the past 15 months, Indian markets have largely delivered flat returns, even as other global markets have rallied. Sood argues that this period of "zero returns" could set up India for a sharp recovery once earnings start to improve. He expects a return to steady growth, supported by domestic demand and policy measures.

InCred's portfolio reflects a defensive stance, with healthcare making up 29% of allocations. Sood sees opportunities in CDMO companies, diagnostics, and hospital plays that are insulated from tariffs. On the consumer side, he expects a revival led by rural India, with a preference for companies in low-unit categories like two-wheelers, small cars, fans, and air conditioners.

Despite global headwinds, Sood sees opportunities in large-cap IT firms, which he views as a capital allocation play with attractive dividend yields and strong cash balances. He also highlights the potential of product companies, such as R Systems and Intellect Design Arena, which are expanding into areas like generative AI.