Avoid this common investing mistake in FY26, warns Sudip Bandyopadhyay

“But we have to remember that this growth and this return is on top of what Indian market has given over the last couple of fiscals. So, it was a fantastic return in the last fiscal,” says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital.

The Nifty in FY25, up 5.2%, but PSU banks and energy stocks those have taken a beating. How do you rate this fiscal for the average retail investor?
Sudip Bandyopadhyay: I think great for the average retail investor. Unfortunately, till September, the momentum was significant and post September massive FII selling and, of course, along with that the domestic macro factors also started cooling off.

We did see a bit of a slowdown in demand initially in rural India, then in urban India, that led to corporate performance also deteriorating. Combination of this led to the market really underperforming Asian peers and other emerging markets.

But we have to remember that this growth and this return is on top of what Indian market has given over the last couple of fiscals. So, it was a fantastic return in the last fiscal.

Unfortunately, this fiscal if you compare growth vis-a-vis other markets, it is not that great. But the way forward is good. Yes, absolutely, there are a lot of uncertainty due to US tariff tantrums, but things will settle down and US and India are not huge trade partners so the impact on India will be limited.

Also, India has a diverse and very well-growing domestic business activity, so the consumption demand and other demand from the domestic market is significant.

There will be sectors and pockets which will get adversely impacted if all-out tariff war breaks out in the world, even if India escapes world economies slowing down will have a negative impact on India. But fundamentally, India is doing things right. Indian inflation is coming down and that gives RBI scope to reduce interest rates, which should help the markets.
But how do you see investors moving? When you look at the way that they have reposed faith in the markets, the midcaps of course we have seen them outperform the broader indices, but you think that trend is likely to continue or do you think investors are going to start rotating into largecaps or do you think they should even at this point?
Sudip Bandyopadhyay: So, a couple of points. One is financialization of saving is real. It is happening as we speak. The trend is very-very clear and in spite of the market fall, the SIP, yes, a little bit of reduction here and there, but trend is definitely there of financialization of saving and that is a very good thing to have happened for Indian capital markets and that is kind of holding the market from falling when FIIs were relentlessly selling.

Market did correct, but it would have been far worse if SIP flows had stopped or retail investors would have started also selling, but that did not happen and DIIs continued to support the market when FIIs were selling, that is point number one.

Point number two, as far as midcap, smallcap, and largecap is concerned, there is a maturity coming whether it is retail investor or even fund managers who are even if it is a smallcap fund, they are going to the extent possible in largecap and midcap.

So, if a smallcap fund, they have categorised that up to 30%, they can have other cap stuff, they are probably filling up that 30%. For retail investors also, they are looking at buying largecaps as well. I have seen that trend getting played out. I do not see any problem in midcap as such because there are very large and good midcap stocks as well and probably in some other markets they would have been classified as largecap already.

So, there are potential in smallcaps as well. What is important is maturity, which is coming. Either if you are investing directly as a retail, you should understand what you are investing in. And if you are not doing that, then you are trusting the fund manager to do the job. As long as you do that, we are fine.

Now that you are seeing these FIIs dipping their toes back into Indian equities, tell us about the sectors that are most likely to benefit from fresh foreign inflows this time.
Sudip Bandyopadhyay: A couple of sectors the FIIs are definitely looking at. One is the entire infrastructure and construction and now that has got multiple legs, whether it is a cement, whether it is EPC companies, whether it is the building material companies, whether it is the irrigation and other construction companies.

So, this entire construction infrastructure space which is a focus area of government, a lot of capital expenditure is happening, private sector capex has started, that is one area which will be definitely of interest. The second area of interest is power. And we are seeing it.

We had seen it earlier also. The power related entire companies, the entire ecosystem of power whether it is a generating company, whether it is a power financing company, whether it is power ancillary, that will get a lot of funding.

The third segment, which I believe will start attracting a lot of FII money is defence. Unfortunately, the valuation is still not cheap, but considering that the world is thinking of rearmament, Europe is already doing it, many other countries are looking at significantly scaling up their armed forces and ammunition, arms and ammunition, Indian defence companies will have a great time going forward considering the cost benefit which Indian manufacturing can provide to these countries.

So, defence is one sector which will attract a lot of money. The last but not the least, I strongly believe that Indian pharma will have a bright future.

There is turbulence now because of tariffs and counter tariffs and things like that, but at the end of the day any standard pharmaceutical product manufactured in India vis-a-vis manufactured in the US, the US probably will be five-six times more costly, the same product manufactured through the same process.

So, under these circumstances, tariffs can only do so much. It will have a significant positive impact on pharma and we strongly believe that pharma is in a space where IT was 20 years back. Indian pharma has the potential to become like Indian IT, which is worldwide recognised and that will happen and FII money will also come in a big way in Indian pharma.

The biggest investing mistake that people made in FY25 that they should not make in FY26?
Sudip Bandyopadhyay: Again, blindly investing based on rumours in smallcap stocks I think that is a big mistake. We keep telling again and again, please do not do this. Either you do your research and then invest or trust the fund manager.