AI-led selloff weighs on markets, but earnings revival could shift mood: Vinit Sambre

A week ago, sentiment on Dalal Street was upbeat. Trade progress with the US and EU, along with a largely acceptable Budget, had put markets on firm footing. But a sharp, AI-led global rally has since redirected flows, triggering a slide in domestic equities.

Vinit Sambre from DSP Mutual Fund believes the bigger picture remains constructive despite near-term volatility. “I am seeing a lot of improvement in domestic macros over the last year — interest rate cuts, GST benefits, income tax benefits and the US trade deal. A lot of the macros are now falling in place,” he said, adding that earnings downgrades appear largely behind us and valuations are becoming “more reasonable.”

The key missing piece, he argued, is earnings growth. “Growth is the most important ingredient. Nifty earnings have slowed from 18–19% to 7–8%, which has subdued sentiment. We need growth visibility to come back — that will be the trigger for markets to move upwards,” Sambre noted. He also pointed out that a stabilising rupee could help improve foreign investor sentiment.

Sectorally, banking could lead the recovery. “Banking was lacklustre for two years, but NIM pressures are reversing. If banks show 15–17% growth, that can be an important driver to overall earnings,” he said.

On consumption, Sambre prefers discretionary over staples. “As income levels grow, people look beyond basic needs. I am more positive on consumer discretionary than FMCG,” he said, highlighting autos, hospitals, jewellery and insurance as pockets of strength. He expects white goods and consumer durables to gradually improve as well.

Healthcare continues to deliver steady growth, while IT remains in a transition phase. Though near-term uncertainties persist, he believes AI adoption could eventually create opportunities for Indian IT firms.
On valuations and downside risk, Sambre advised against obsessing over another 8–10% correction. “Valuations look reasonable after underperformance. More importantly, we need visible signs of business momentum picking up. Today, noise levels are high and there is overreaction,” he said. For now, markets are balancing improving domestic fundamentals against global AI-driven capital shifts. The next decisive move may hinge less on headlines and more on earnings delivering on promise.