BofA India Conference 2026 | Expect Around 10% Upside In Rupee Terms Under Base Case: Amish Shah

Añadido: 2026-05-30

[00:00:00]Well, it's uh conference season and uh one of the most attended uh sort of sought-after conferences is the BofA India conference, uh the flagship annual investor conference. Uh this is of course 2026 uh 26th edition, uh which is going to kick off. Uh and as always, we have uh you know, the top uh man from BofA joining us to sort of uh uh raise the curtain, so as to speak, uh as far as the conference is concerned.

[00:00:26]Amish is head of India research at Bank of America Global Research. Uh Amish, great to have you with us here. Thank you very much for joining us.

[00:00:32]>> Pleasure's all mine.

[00:00:33]>> Uh so, what what do you expect? Uh as just tell us a little bit about the conference, how is the how this one is set up, and and what's what are you aiming to get to investors who are going to be there? Uh what's what's the message that you I mean, of course, there'll be company meetings, etc., but is there an overarching kind of theme uh that that you've sort of set?

[00:00:51]>> So, Prashant, the theme is new frontiers of growth, uh because as we know, uh you know, we know that because of the West Asia conflict, uh the historical models that were working or themes that were working maybe have peaked out. Maybe there is uh there is need for new avenues of growth. Uh we talk about energy security, AI, data centers, shipbuilding. So, all of these we think are the new areas where uh there will be growth driving India. Uh so, the focus is uh focus is on new frontiers of growth. Well-attended conference. It's a week-long event. So, we are doing uh first 3 days in Mumbai, uh right here in right here, and then we have six different field trips uh across different sectors, like internet, consumption. There's a policy tour where you meet the policy makers, etc. So, it's a week-long event, and we hope uh that there will be a lots to absorb and learn and understand what will drive growth going forward.

[00:01:43]>> And you want to tell us a little bit about the new frontiers of growth? What will drive uh India from here on?

[00:01:49]>> So, Reema, as as of now, this is expectation, uh you know, from our side in terms of research. Uh policies are yet to come out. Uh but I'm I'm sure you would have heard about energy security some of those >> We spoke about it last time as well as a policy imperative.

[00:02:02]>> Absolutely, but within the energy security if you drill down there are six different themes, right? You know, there is coal gasification, there is biofuels, there is electrification, you know, deep water exploration so on and so forth. And within each one of these themes there are sub themes like let's say within electrification, how much comes from nuclear power, how much is coal, how much is batteries and so on and so forth. You know, so it's a pretty well encompassing thing and over and above that we think that you know, things like shipbuilding. So I personally believe that shipbuilding is where you had EMS sector let's say 7 years back. EMS was not a sector in India.

[00:02:38]It got created on the back of government push and policies and PLI scheme etc. Same is already replicating now in the case of shipbuilding because 90 plus percent market share of shipbuilding globally is China, Korea, China, Korea and Japan. And this is a very labor intensive sector. Population is aging in these three countries. It's a matter of time that the market share moves somewhere else and India is trying to say that you know, we have a plenty of labor. If the market share dislocation happens, why not us?

[00:03:07]You know, so that's one of the reasons.

[00:03:09]There are other factors at play, but policy action is already started. There is a PLI scheme that has come in. There is a capex subsidy scheme. There is an interest rate subvention scheme. There's a new fund that they are creating to you know, to finance shipbuilding sector and so on and so forth. So we think it can become like a multi-decade theme going forward.

[00:03:26]>> Oh, interesting. You know, if shipbuilding is going to be at the juncture that the EMS companies were 6-7 years ago, then interesting times ahead.

[00:03:33]Not that. What about cap goods? You know, we've got a few earnings that have come in the last few days. Some of them numbers not that great, but commentary has been fairly positive. How you feeling about that theme?

[00:03:43]>> So two things I will say in idle. So first of all, across the board a trend that we are seeing is that because of higher inflation or higher commodity prices, order flows and top line growths are a beat.

[00:03:55]>> Yeah.

[00:03:55]>> But margin because margins are also taking an impact because of commodity.

[00:03:59]So, earnings are not necessarily a beat.

[00:04:01]Right? So, headline is a positive, but the bottom line is not a positive. This is by and large just generalizing for the sector. But within the cap good space, we think that there are some sub segments of capex that will do very well.

[00:04:13]>> Mhm.

[00:04:13]>> Uh again, uh the likes of data centers, ship building, defense, cables, uh transformers, you know, so that as an ecosystem or any company linked to that ecosystem will do very well. But in general, anything that was linked to state government capex, the state governments as we know have gone more populist and uh at the cost of capex therefore. So, uh you know, so state government capex is primarily in water, irrigation, metros, uh those kind of things we think will uh take a knock down in terms of capex.

[00:04:42]>> You got it.

[00:04:43]>> Uh do you have some hard numbers to talk about why you believe ship building is where it was uh where EMS was 7 years ago in terms of uh valuation, in terms of size, and what it can become going forward because already ship building is a discovered theme. Unlike say EMS, you know, 7-8 years back, it was a very small industry.

[00:05:03]>> Sure. So, uh so, Rima, first that as I said, 90 plus percent market share uh is three countries globally. It's a labor intensive sector.

[00:05:11]>> Okay.

[00:05:11]>> Labor in those three countries is aging.

[00:05:13]As a as a matter of fact, there's a result, over time, this market share will move somewhere in the world. Uh if it is labor intensive, India can at least have a >> That's India's right to win.

[00:05:23]>> So, that's the first point. The second I would say is that India by volumes is 6% of the global seaborne trade. Not by value, but by volumes.

[00:05:32]>> Mhm.

[00:05:32]>> But again, 90 plus percent of Indian cargo moves on foreign flagships. So, in in times like these, like a West Asia conflict, it's not our war. It's somebody else's war, but let's say if a ship does not sail from there, it becomes your supply chain problem. So, from a self-sufficiency or self-reliance perspective, also we need to have some of our own ships. If you think about it, India has very few ships of its own and there are very few companies that have ships of their own, right? You know, so can you have more ship owners? And if you have to have ship owners, can you also have ship builders? And if you have ship builders, then can you have a value chain around that? Is basically the way you have to think about it. Now, in terms of policy action, you already have a PLI scheme that has come through. You have a capex subsidy scheme that has come through.

[00:06:20]You have an interest rate subvention scheme. They have classified ships now as an infrastructure category, so it gets into a priority sector lending and they are trying to create a fund you know, which can then give out uh loans to ship builders and ship owners. So, right now uh you know, it is more in the policy action stage. Over a period of time, if it bulks up and if there is you know, if India finds success, then you will find many more countries want Sorry, many more companies wanting to enter in this space as owners or builders.

[00:06:50]>> So, right now how do you play it?

[00:06:51]Shipbuilding?

[00:06:52]>> So, right now you guys are right. Uh you know, there are handful of companies which are listed.

[00:06:56]>> Cochin, Mazagon, Garden Reach, all these companies basically.

[00:06:59]>> Handful of companies which are listed.

[00:07:01]But I I think that that that sector will expand will expand.

[00:07:05]>> Uh but but these are these are stocks you'd be I mean, I'm just asking if a public nothing which is I mean, you you these are these are good thing stocks to buy even after what they've done valuation wise.

[00:07:16]>> So, so Prashant, I would say that you know, if you really believe that you know, this is going to become a sector of prominence, then I think there is a long run way for growth.

[00:07:25]But obviously, if the if the question is more from the perspective of 2026, can I make money? Possibly not.

[00:07:31]>> Okay. The other two areas you mentioned which is transformers and cables, right?

[00:07:35]Which is again capex sectors that you like.

[00:07:38]This is related to the it's it's it's a AI kind of allied kind of story because that's the pack which is doing exceptionally well right across the board.

[00:07:48]>> Absolutely yes. You know, so AI as of now, but again if there is a policy action in terms of power distribution reforms, energy security, then there will be another leg of growth that gets added to this theme.

[00:08:01]You know, so then then so let's say if these companies are already doing 15 to 20% growth, can they become sustainably 20 plus percent growth companies and therefore can their premium valuation sustain? It's a debate and it's depend that debate is dependent on a binary equation of whether energy security becomes a policy framework. But we do think that going by the logic of it and the economics of it, government should definitely announce it.

[00:08:24]>> In India if you want to sort of you know, look at that you said data center is another area where you think there will be there's money there's this you like that space, right? So direct data center companies, I mean there are a few one or but very few, right? In in India.

[00:08:37]So you have to play it through the allied kind of space.

[00:08:39]>> Eco value chain play.

[00:08:41]>> Cables and wires perhaps is a is a strong enough.

[00:08:43]>> Absolutely. So I think that you know, given the valuations also in context, transformers in our view are now very expensive stocks.

[00:08:50]We currently we prefer more of engines, cables and wires, power generators, power transmitters and power financing companies.

[00:08:59]And and if you have to extend that then I would say that you know, the the companies in the energy value chain which is coal and gas utilities. So those are companies where we find value. Transformers while is obviously beneficiary of the theme is very expensive as a sector like 70 B multiple sector now. It's not something that we are pushing at the moment.

[00:09:20]>> cables and what do you mean engines? Uh >> The the companies that make engines that in turn goes into backup power gen sets.

[00:09:28]>> Cummins etc. I mean those kind of things basically. What else there? Cables, engines, I think you mentioned a few other areas.

[00:09:34]>> Power financing companies.

[00:09:35]>> Power financing. Power generators, power transmission companies but the regulated ones you know with the guaranteed ROEs.

[00:09:41]We are not that much positive on the renewable place.

[00:09:44]Renewable developers we mean because these companies have a lot of growth, but their returns are not great. You know so they all make less you know single digit returns. So it's not a very return generating sector even though there's a lot of growth in that space.

[00:09:58]>> So the sectors that you've highlighted, the themes we've spoken about are all structural themes and they will do well in the next 5 to 7 years. But for many of them you said that perhaps 2026 or the near term may not be the year where you make money. So if you just had to look at the next 9 months, 12 months, where do you think money can be made in India?

[00:10:16]>> Look, this is a tough year for India or it's a continuation of a tough year from the last year as well. So so if you if you look at our year end views, we think that from where we are in the markets currently, Nifty can possibly give you a 10% rupee returns.

[00:10:33]From now.

[00:10:35]No, this is our base case. So 10% rupee returns from where we are trading right now. But if you're sitting in December of this year and when you look at the year as a whole, even with a 10% upside from current levels, we are talking about 0% returns or flat returns in rupee terms. So in dollar terms obviously because rupee has depreciated from a foreign investor perspective, your dollar returns are going to be negative for the year as a whole and therefore India definitely continues to underperform emerging markets this year. Right? So so by and large there is you are right. This is not a great year to make money in India and therefore it's going to be bottom up themes.

[00:11:11]There are about 15, 16 stocks that we are excited about within our coverage which is high conviction and all they all fall into the themes that we are discussing.

[00:11:19]>> And I just one more question. When we last spoke you brought down your GDP estimates. We were discussing that how it was 14%. Sorry, you brought down your earnings growth expectations from 14% to 8 and 1/2% and Q4 was fine. Have you revised the earnings expectations for this year?

[00:11:34]>> We haven't. You know, so first of all, you would recollect that we we took our earnings down in March itself. West Asia conflict, you will remember, exactly started on 28th of Feb. So, we were anticipatory. You know, we were proactive. We cut the earnings. West Asia conflict, unfortunately, as we speak, is still going on. And as a result, and we had you know, when we had taken these estimates, the assumption was that the conflict gets over end end of June. You know, so if it does not get over before the end of June, there is no reason to upgrade our estimates. Now, coming to earnings itself, now I know there is a general belief that the earning season in the fourth quarter was good.

[00:12:11]I would say yes and no.

[00:12:13]Let me explain that. So, let's say Nifty. 48 out of 50 companies have reported. At the headline, 2/3 of the companies that have reported have had a beat. Okay, and that's good news. But when you look at the absolute growth number, Nifty has delivered only 4.6% earnings growth, which is which is not very exciting. Point one. Point two, 1/3 of this 4.6% growth, actually, sorry, 45% of these 4.6% growth is explained by commodity rally. So, steel, aluminum kind of companies is equal to bulk of your profits. You know, his Generally, this is cyclical earnings, and investors don't pay a higher valuation multiple for commodity driven earnings growth.

[00:12:53]Right? So, that's the second point. If you make it broader and look at NSE 200 companies, growth has only been 9%. So, again, very muted growth for a mid-cap, small-cap kind of universe.

[00:13:04]>> This is NSE 500.

[00:13:05]>> 200.

[00:13:05]>> 200. 9.6 >> 9% growth. 9% growth, 1/3 of that 9% is again commodities. And out there, 80% of the companies have actually missed earnings. Only 20 have delivered a beat.

[00:13:17]So, you know, so you can really swing the earnings data both ways. If you're an optimist, you can you will focus on Nifty and say that 2/3 are a beat.

[00:13:26]And you will skip the point that, you know, the growth there is a beat, but the beat is actually very small numbers.

[00:13:32]And then final point I will make is that whether you look at a Nifty or NSE 200, the beats were in very specific sectors, which is financials, IT, utilities.

[00:13:42]Variety of other sectors, you know, the beat was nothing meaningful to talk about. So, so again from that perspective in June quarter because of the West West Asia conflict, we know it's going to be a stressful quarter.

[00:13:54]So, we are not yet in the camp of looking at upside triggers.

[00:13:57]Final point I will make there is a debate going on whether India needs to hike interest rates or not. We as a house have taken a view that there is a 50 basis points of hike in F27. So, one this year and one in March of next year.

[00:14:10]If that comes, that is also a growth impact to Nifty or NSE 200 earnings.

[00:14:16]>> Okay, final question then before we let you go. Amnish, what about uh the AI trade? You know, now T has become the new B. Everyone's talking about trillion.

[00:14:26]Uh what's where are y'all at? Do you think it's getting into a bit of a bubble territory or do >> As Prashant said, T has become the new B.

[00:14:35]>> [laughter] >> As as Prashant said, and you know, the discussion that we had earlier.

[00:14:43]So, where are y'all on that one?

[00:14:44]>> So, look, here let me bring in our global views. So, if I if I look at the research from my global strategist, he's arguing clearly that the rally has gone overboard.

[00:14:55]>> Mhm.

[00:14:55]>> Uh his views are Okay, okay, some stats.

[00:14:58]So, you know, if I if if we look at the BofA Private Wealth, you know, it's about 4.35 trillion dollars that we manage. Uh within that, the allocation to equities is at a historical high at around 66%.

[00:15:13]The allocation to cash is at a historic low at around 9%.

[00:15:17]Uh we worry that the inflation in the US is going to go beyond 4% and therefore the policy rates in the US will get a hike. Uh and the trade in US as we know is crowded in AI or tech stocks.

[00:15:29]Uh and his views are that there will be a he also does a bull in a bull bear indicator. His indicator is currently suggesting that it's an extreme bullishness and therefore market should have a pullback on a tactical basis. Uh so we are talking about a near-term correction in the US as a result.

[00:15:47]>> And what about our tech names? Big underperformers, the fear was AI is eating into everyone.

[00:15:53]At these valuations, you know, with the regard to the yields, cash flow yields, the PEs in comparison to historic averages as well and the kind of underperformance, do you think there's a chance that this one's actually bottoming out?

[00:16:05]>> Uh bottoming out more likely.

[00:16:07]Uh do would we go to still bottom fish yet? Not really. So we were underweight.

[00:16:12]We we are not as bearish as we were before because the stocks have come off.

[00:16:16]But you know, there is still lack of positive triggers in that sector. And the valuation gap between, let's say, foreign listed software companies or IT firms, they trade at nine to 10 times P multiple. Large caps in India is 15 16 P multiple. So we still think that the valuation gap is still still large enough. Uh you know, so basically can the can the stocks flatline from here? More likely.

[00:16:40]But will they give you like a meaningful return? Unlikely.

[00:16:44]>> One speaker you're really looking forward to listen listening to from in the conference, Amish.

[00:16:48]>> Well, there are a few, but I would say that we have some you know, we have speakers coming from the Prime Minister's office. You know, since we spoke a lot about policy, that's going to be important. We have some state ministers presenting on why data centers in their respective states.

[00:17:03]Again, a thematic sector, so will be very interesting to hear.

[00:17:06]>> And your personal opinion on this evergreen question of whether we will see capital gains tax on equities being brought down. It's like a huge debate out there. Your your own view.

[00:17:16]>> So, Prashant, you know, clearly has taxation lopsided allocations of retail savings towards equities completely yes.

[00:17:27]Has it has the capital gains discouraged foreign investors, especially when rupee is hurting, especially when, you know, earnings growth is low, valuations for India are high? So, therefore, is India out of my radar as a foreign investor?

[00:17:41]The answer is yes.

[00:17:42]Uh and then given that large part of the rupee problem right now is also lack of capital flows, uh I think it makes sense for us to do it. So, the answer that I'm trying to give is that, you know, logically if you think about it, we must do it. Whether we will do it is completely anybody's guess.

[00:17:58]>> We will get a signal at the conference uh from some of the people. Thank you very much, Amish, and good luck with the conference uh and wishing you all the best. And uh I think it's a great title for a new report, tea is the new beer.

[00:18:08]Billion [laughter] is the new billion.

[00:18:09]>> That's a good one.

[00:18:10]>> so myself.

[00:18:11]>> Uh and since it's >> it's a Friday, I think uh tea >> I mean, beer could be the new tea.

[00:18:17]>> I'm kidding.

[00:18:18]>> [laughter] >> All right, uh great chatting with you.

[00:18:19]Thank you very much for coming down to the studio. We look forward to speaking with you once your conference is done.

[00:18:24]>> Thank you.

[00:18:24]>> Uh let's