The
Indian equity market is entering a phase of sharp
sectoral rotation, where leadership is narrowing and thematic investing is gaining importance. According to
Gautam Shah from
Goldilocks Global Research while the broader indices may remain capped in the near term, sectors like energy, PSU, metals, and select pockets of real estate and pharma are setting up for stronger upside trends.
Energy remains a structural story
Shah reiterated his long-standing bullish view on energy, calling it a structural theme with durable tailwinds.
“Energy is a structural play. There are a lot of fundamental tailwinds there. Valuations seem to be comfortable and the government is at play, helping many of the Indian companies to do much bigger things on a global scale. Given all of that and given the way the charts are, I do believe that energy is a structural play and we are looking at the index going back to the previous highs at least. That would be the first working target and then much bigger upside. So, the entire basket of power and energy stocks looks good to me. We have obviously been committed to it for a couple of months now and we are playing test cricket here. We are not looking at getting out very quickly. So, think big. There is another 15% to 20% upside on the index and you just stay committed. There will be dips from time to time because the rally has been large and every time that dip happens it might be a good idea to buy fresh.”
He added that investors can either accumulate baskets or focus on selective stock picking within the space.
Auto sector under pressure
On autos, Shah maintained a negative stance and expects meaningful underperformance ahead.
“We would be negative on auto, I think that has been the stance for a couple of months now. And with auto being a direct reflection of the economy and with the way the charts are placed, there is a greater possibility of the auto index actually losing about 10-12% from here and going back to the March lows. Now, if that were to happen, then there is a big problem because a lot of stocks will come off substantially.”
He added that both autos and FMCG could remain under pressure if largecaps fail to show leadership.
Nifty stuck in a tight range
On the broader index, Shah expects consolidation with a defined trading band and limited upside unless key resistance levels are breached.
“24,600 on multiple counts was and remains a very important resistance. And as you might have noticed in the last seven days, the market is just taking a breather. There seems to be a fierce battle between the bulls and the bears within a very tight range, 23,800 on the downside and 24,250 and 24,600 on the upside. Till the Nifty does not get past 24,600, I would be cautious, I would be conservative and there is a greater possibility of a breakdown below 23,800.”
He highlighted weak leadership from IT, banking, and Reliance Industries, which together form a large part of the index.
Banks and IT remain weak links
Shah expressed caution on banks, particularly private lenders, which he believes could weigh on the index.
“Look at what HDFC Bank has done in this entire April recovery and look at where it is today in comparison to the rest of the banking space. When you have HDFC and ICICI Bank undergoing such a phase of underperformance and not being able to rally for whatever reasons, questions about their growth, FII selling, the fact that they are all richly valued versus peers around the world, you can put out a lot of cases there. But it is out there that private banks are underperforming and if that is going to continue, Nifty will find it difficult to rally.”
He added that PSU banks remain mixed, with only one large name standing out.
Sector rotation into PSUs, metals and pharma
Shah believes the market is now entering a phase of rotational strength across previously underperforming sectors.
He remains bullish on PSU, metals, defence, capital goods, and real estate over a 6–12 month horizon. He also sees early signs of revival in chemicals, textiles, and pharma.
“Pharma is one space that we continue to like… a bigger breakout is coming after 18 months of consolidation and it will do exceedingly well.”
On metals, he remains strongly constructive with a long-term structural view:
“Our working target for the NSE Metals Index is about 14,000… The rest of this year will belong to metals.”
Real estate showing bottoming signs
Shah sees real estate as a high-conviction medium-term opportunity after a deep correction.
“We are going to see a large 25% rally on the index from current levels… So, it is an opportunity, but do not look at it short term. There will be volatility in the short term, but now they will start a sequence of higher tops and higher bottoms.”
Crude oil and macro risks
On crude oil, Shah flagged it as a key risk factor for India.
“Nymex crude is likely to remain elevated… eventually it can gradually go towards a 120-125 number. Now if that were to happen, it is definitely a big impact on the economy more medium-term.”
He also pointed to rupee weakness and global AI-driven disruption as additional headwinds for foreign inflows.
Final takeaway: be selective and concentrated
Summing up his strategy, Shah advised a focused approach rather than broad diversification.
“Be concentrated, be in companies that have less to do with foreign policy and be with companies that have relative better earnings visibility for the next three to five years. Anything and everything in this market will not work because you do not have the index tailwind in your favour.”
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