Gone are the days of open trade in commodities. Trade barriers and hoarding—by governments, traders and even investors—are the features of today’s markets. That is fragmenting commerce and fueling price volatility. 

Take copper. After President Trump announced last year that he would impose tariffs on the red metal, traders stockpiled it in the U.S., sending the U.S. price surging much higher than the price in London. At one point last summer, copper futures on the U.S. Comex were 30% pricier than cash copper prices on the London Metal Exchange.

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Radhavi Deshpande, Chief Investment Officer at Kotak Mahindra Life Insurance, believes REITs and InvITs are positioned to assume a more meaningful role over time, driven by stable cash flows, improving market depth, and their ability to enhance risk-adjusted portfolio returns.

In this chat, she shares her outlook for FY27 in terms of earnings growth, smallcaps, and sectoral opportunities.

With life insurers inherently operating on long-term liabilities, how are you positioning the fixed income book amid uncertainty around the rate cycle and yield curve movements?

Given the long-duration nature of our liabilities, our fixed income positioning is anchored in asset-liability matching rather than tactical rate calls. While the global rate cycle appears closer to stabilization, domestic liquidity, fiscal supply dynamics, and inflation trajectory continue to influence yield curve movements.

We are therefore maintaining duration aligned with liabilities while selectively adding spread assets at attractive yields. We continue to scout for acceptable credit that meets all our risk criteria, along with proportionate credit and tenor spread. In a range-bound rate environment, carry and disciplined deployment tend to reward more than duration strategies.

How are you evaluating allocations to emerging avenues such as REITs, InvITs, and other alternative assets within the broader asset-liability management framework?

REITs and InvITs are evaluated as strategic portfolio assets rather than tactical yield enhancers. For long-duration investors like us, these instruments offer stable cash flows, superior risk-adjusted returns, and diversification away from traditional fixed income. However, overall allocation to these assets remains calibrated. We focus on marquee sponsors, high-quality assets, manageable leverage, and stable distributions. Over time, as the ecosystem matures and secondary market depth improves, these assets can play an even larger role in enhancing portfolio returns.

How do you assess the current market construct in terms of valuation comfort versus earnings visibility?

The market today reflects selective comfort rather than broad-based valuation ease. Large caps offer relatively better alignment between earnings, visibility, and multiples, supported by strong balance sheets and cash flow resilience. In contrast, certain segments of mid and small caps are pricing in optimistic multiyear growth assumptions.
India’s structural growth story remains intact, but liquidity-driven re-rating has largely played out so far. The next leg of returns should be earnings-led. We therefore remain constructive yet selective, favoring companies with pricing power, capital efficiency, and earnings durability over thematic or narrative-driven plays.

Corporate earnings growth has shown signs of improvement. Do you think full earnings recovery will occur from FY27 onwards?

We are seeing early signs of normalization after a period of margin compression and uneven demand recovery. That said, a full-fledged earnings recovery from FY27 onwards will depend on sustained private capex, continued financial sector strength, and external demand stability. Our base case is for a progressive and broadening recovery rather than a sharp surge. Companies that invested through the slowdown and maintained balance sheet discipline are best positioned to lead in this phase.

Do you anticipate earnings growth broadening across sectors, or remaining concentrated in select themes such as financials, manufacturing, or consumption?

Financials remain structurally well-placed given credit penetration, asset quality normalization, and strong capitalization. Manufacturing and industrials continue to benefit from supply chain diversification and government capex momentum. However, for markets to deliver sustained returns, earnings must broaden beyond these pillars. Consumption recovery, especially in rural and mass segments, will be important for true breadth. The next phase is likely to reward dispersion and bottom-up selection. Our positioning reflects that balance.

Small- and mid-cap stocks have seen significant participation from retail investors over the past few years. How are you evaluating risk-reward in this segment, especially from the lens of capital preservation for policyholders? Do you think small caps will bounce back in FY27?

From the policyholder perspective, capital preservation and risk-adjusted return remain paramount. While small and mid-caps have delivered strong returns, dispersion within the segment is extremely high. Balance sheet quality, governance standards, and earnings sustainability vary widely. We therefore remain highly selective. A broad-based bounce in FY27 would require sustained earnings delivery and supportive liquidity conditions. The next phase is likely to reward quality and cash flow visibility rather than momentum-driven participation.

Which market segments are you bullish on based on both earnings growth and valuation comfort?

Large-cap financials continue to offer a compelling blend of earnings visibility and reasonable valuations. Select industrial and manufacturing companies with strong order books and operating leverage also stand out.

Within consumption, opportunities are emerging where rural recovery and premiumization intersect, though we remain valuation-conscious. Overall, our approach remains consistent: constructive on India’s medium-term growth trajectory, but disciplined on valuation and quality. The coming phase is likely to be earnings-driven and selective rather than broad-based and liquidity-led.