Market participants are increasingly debating whether equities can regain leadership in the coming financial year, following a period marked by sharp cross-asset movements and persistent investor interest in precious metals. With focus shifting between gold, silver, and stocks, investors are questioning whether a multi-asset approach will continue or if equities are positioned for stronger performance ahead.

Positive FY27 Outlook Driven by Improving Macros

Manish Sonthalia from Emkay Investment Managers believes the outlook for Indian markets is improving meaningfully, with FY27 expected to mark a clear step up from the previous year. "FY27 should be better than FY26 for sure on the back of better macros as far as India is concerned," he stated, highlighting several supportive factors.

Sonthalia expects FY27 to outperform FY26 with 12-13% earnings growth, driven by low inflation, reduced rates, and improving macros. He sees opportunities in rate-sensitive sectors and the pharmaceutical CDMO space.

The broader setup appears supportive, though markets are awaiting a key global trigger. Sonthalia noted that "market is waiting with bated breath as to see the light of the day for the US trade deal," suggesting that markets may wait until March for clarity on this potential catalyst.

Earnings Growth and Sectoral Outlook

Sonthalia expects earnings growth to regain momentum, projecting FY27 growth at 12-13% with potential upside of around 15% by year-end. His sectoral outlook highlights a mix of financials, industrials, and defensives as key contributors.

Strong Performance Expected

• Banks: Decent earnings growth anticipated
• IT: Projected growth of 6-7%
• Capital goods: Positive outlook
• NBFCs: Expected to perform well
• Healthcare: Strong performance ahead

Sectors Facing Headwinds

• Metals: High base effect concerns
• Oil and Gas: Challenging comparisons

Rate-Sensitive Sectors Positioned to Benefit

In the low-inflation environment, rate-sensitive segments could emerge as significant beneficiaries. Sonthalia highlighted several areas poised for growth:

Consumption-linked segments could benefit from multiple policy tailwinds, including "rate cuts, GST cuts, income tax cuts, and one lakh crore incentive," all contributing to consumption growth.

Valuation Concerns in Capital-Intensive Sectors

Despite growth visibility in infrastructure-related areas, Sonthalia continues to flag valuation concerns in capital-intensive sectors. "Valuations are still very elevated because some of these favoured sectors are discounting probably FY28-29 and no room for error," he cautioned.

While growth visibility exists in roads, railways, defense, and capital goods, much of the expected performance appears already priced in, potentially limiting near-term returns.

Pharmaceutical Sector Opportunities

Sonthalia remains constructive on pharmaceuticals, particularly if generics remain outside tariff discussions. He sees significant promise in the CDMO (Contract Development and Manufacturing Organization) segment, which has undergone sharp correction.

"One space which has seen significant correction is basically the CDMO space... this is one space which is very-very exciting," Sonthalia emphasized, highlighting structural opportunities from global supply chain shifts.

Investment Strategy and Stock Selection

As leadership within sectors shifts, Sonthalia underscored the growing importance of bottom-up stock selection. He stressed that "you cannot paint everything with the same brush saying that everything is very expensive and the mid and smallcap universe is to be avoided totally."

The investment manager believes valuations have corrected meaningfully in pockets, creating selective opportunities for investors who focus on individual stock fundamentals rather than broad market generalizations.

Overall, Sonthalia believes FY27 could reward disciplined investors who focus on valuations, sectoral tailwinds, and bottom-up stock selection rather than chasing crowded investment themes.

Market expert Jimeet Modi has raised concerns about the increasing concentration of Indian markets into duopolies, where two dominant players control the majority of market share across multiple sectors. The SAMCO Group founder warns that this structural shift may pose significant risks for both investors and consumers.

Aviation Sector Leads Duopoly Formation

The aviation industry exemplifies this trend most clearly, with IndiGo and Air India together reportedly controlling nearly 90% of the domestic market. This represents a dramatic shift from two decades ago when multiple carriers including Jet Airways, Indian Airlines, Kingfisher, and Sahara competed actively for market share.

Government Response to Market Concentration

Recognizing the potential structural risks, the government has reportedly approved new airline entrants to dilute the aviation duopoly. The regulatory approvals include:

• Al Hind Air: Cleared for operations
• FlyExpress: Approved as new entrant
• Shankh Air: Preparing for launch

These approvals may represent a deliberate policy intervention rather than routine licensing, potentially reflecting growing regulatory concern about market concentration reaching critical levels.

Duopoly Trends Beyond Aviation

Modi's analysis extends beyond aviation to highlight similar patterns across the Indian economy. The food delivery market reportedly sees Zomato and Swiggy controlling approximately 95% of deliveries, while digital payments are dominated by PhonePe and Google Pay with over 80% market share. The telecommunications sector has also consolidated around Jio and Airtel as primary players.

The expert argues that such concentration could fundamentally change market dynamics, potentially shifting from competitive pricing and innovation to what economists term "tacit coordination" between dominant players.

Investment and Policy Implications

For investors, Modi suggests that while duopolies may appear attractive short-term due to stable cash flows and reduced volatility, they could pose long-term risks to value creation. The analysis emphasizes that healthy market ecosystems may require contestability - the constant threat of disruption from smaller competitors.

The regulatory response in aviation indicates policymakers may understand that markets rarely self-correct once concentration hardens, potentially requiring intervention before dominance becomes entrenched. Whether new entrants can successfully challenge established duopolies remains uncertain, given aviation's capital intensity and thin margins.

Market Structure Concerns

The analysis warns that when market power concentrates to 70-90% levels, competition could become "performative" rather than genuine. This shift may lead to higher prices, reduced innovation, and deteriorating service quality over time, as dominant players focus on market management rather than customer acquisition.

Modi concludes that India's growth story may depend on maintaining broad opportunity and deep markets rather than narrow concentrations of power, emphasizing the need for continued vigilance regarding duopoly formation across sectors.

The growing duopoly concentration across Indian sectors, from aviation to digital payments, highlights potential structural risks for investors and consumers as two-player dominance reaches 70-90% market share in various industries. This trend underscores the importance of regulatory oversight and market diversification to maintain healthy competition and economic growth in India.