Sunil Subramaniam, Founder and CEO of Sense and Simplicity, has identified engineering, procurement and construction (EPC) companies and financiers as the most compelling investment opportunities within India's expanding power sector. Speaking to ET Now, he emphasized that these segments offer superior operating leverage and execution-led growth potential compared to other power ecosystem participants.

Power Sector Investment Strategy

Subramaniam's investment thesis centers on the fundamental roles these companies play in India's ongoing power infrastructure development. He explained that financiers will benefit significantly as capital deployment increases across power projects, while EPC companies serve as the primary executors of these initiatives.

"Ultimately, financiers will benefit significantly as capital deployment rises, and EPC companies will be the actual executors of projects. That is where higher operating leverage comes into play," Subramaniam noted, though he refrained from commenting on specific stock preferences.

Pharmaceutical Sector: Four-Part Investment Framework

The pharmaceutical sector presents what Subramaniam describes as a "four-part puzzle" offering distinct investment opportunities across multiple segments. His framework identifies four key growth levers within the pharma space:

Subramaniam recommends a strategic allocation approach for pharma investments: "In terms of allocation, around 60% should go towards domestic pharma and the semaglutide opportunity, while the remaining 40% can be tactically split between generics and CDMO."

Market Outlook and Investment Timing

Current market weakness reflects widespread caution among institutional investors, driven by valuation concerns and uncertainty surrounding the upcoming earnings season and Union Budget. Subramaniam expects this cautious sentiment to persist through the first half of the year.

"Fund managers would rather sit on cash until there is clarity on earnings and budget announcements. Meaningful tactical allocations are likely only after mid-February," he observed.

Both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) remain hesitant to deploy fresh capital, waiting for earnings visibility and clearer market direction. Subramaniam anticipates a bifurcated year with the second half performing better than the first, though he cautioned about uncertain one-year equity returns due to global trade tensions.

Sector-Specific Perspectives

China Policy and Export Potential

Regarding potential policy changes allowing Chinese firms to bid for government contracts, Subramaniam views this as a pragmatic approach balancing political and economic considerations. He believes selective Chinese participation could provide access to advanced technology and scale advantages, particularly benefiting sectors like pharmaceuticals where China remains a major active pharmaceutical ingredient supplier.

Auto and Banking Sectors

In the automotive sector, Subramaniam expects margin pressure in the near term despite robust sales volumes, as companies implement price cuts to stimulate demand. However, he believes earnings per share could remain stable due to high operating leverage.

For banking, he anticipates near-term outperformance from private sector banks and NBFCs, driven by consumer and auto-led credit growth. PSU banks, while offering valuation comfort, may see stronger momentum only in the second half, supported by potential capex revival and housing demand recovery.

India's information technology sector could emerge as a surprise winner in 2026 after a disappointing performance in 2025, according to market expert Sunil Subramaniam, Founder & CEO of Sense and Simplicity. Speaking to ET Now, he identified IT as a key contrarian investment opportunity alongside real estate, select pharmaceutical themes, and private-sector-led capital expenditure as sectoral leadership broadens.

Subramaniam highlighted early signs of recovery in the IT sector, noting a significant shift in performance trends. The Nifty IT Index, which underperformed sharply over the past year, is already showing reversal signals with contrasting short-term and long-term performance metrics.

IT Sector Performance Indicators

Structural Transformation Driving IT Recovery

The IT sector is undergoing a fundamental reset with companies investing aggressively in artificial intelligence capabilities. Subramaniam explained that IT players are either acquiring AI firms or making substantial investments in AI technologies. Simultaneously, companies are restructuring their workforce by retrenching mid-level staff who lack AI readiness while hiring fresh talent with specialized AI skills.

AI consulting is expected to become a major growth driver for the sector in the coming year. The nearly 7.00% rupee depreciation should boost rupee-denominated revenues for export-heavy IT companies, providing near-term earnings support.

From a global investment perspective, the sector could attract foreign institutional investors as US rate cuts are expected. Subramaniam noted that FIIs may prefer IT because it offers a natural currency hedge, with IT earnings typically compensating when the rupee weakens.

Real Estate Positioned for Strong Recovery

Beyond IT, Subramaniam expressed optimism about real estate, which significantly underperformed in 2025 despite strong underlying fundamentals. While housing unit sales moderated, property values continued rising, driven by demand for premium and high-end homes.

The expert expects developers to increasingly pivot towards affordable housing in 2026, aided by lower borrowing costs and reduced GST on building materials. Land acquisition on city outskirts and smaller-ticket projects could drive volumes in the next phase.

Global Capability Centres expansion in India, triggered by global trade uncertainties and visa-related issues abroad, represents another key tailwind. This GCC growth directly supports corporate real estate demand and reinforces office space requirements.

Improved Funding Environment Through REITs

The funding environment for real estate developers is improving significantly. With REITs gaining equity status, more mutual funds are expected to increase allocations to REITs. Subramaniam anticipates the potential launch of dedicated REIT thematic funds, offering equity taxation benefits with stable income streams. This development should enhance funding access for developers and support sectoral rerating.

Pharma Growth Led by GLP-1 Drugs

In pharmaceuticals, GLP-1 drugs will remain the dominant growth theme in 2026. Subramaniam emphasized India's position as a major obesity market, creating substantial domestic demand for GLP-1 molecules. He described this as a transformative story that will continue driving pharma valuations, suggesting investors need not look beyond this trend for near-term growth triggers.

Capex Strategy Shifts Toward Private Enablement

Regarding infrastructure and capital expenditure, the government is expected to subtly shift strategy from solely driving public capex toward enabling private sector investment. This transition involves public-private partnerships, PLI scheme adjustments, and asset monetization initiatives.

The government aims to maintain stable capex while diverting more resources toward consumption and middle-class support. Roads, logistics, and other PPP-led infrastructure segments could see increased private participation as a result of this strategic shift.

Subramaniam believes 2026 could reward investors willing to take selective contrarian positions, noting that IT, real estate, and certain capex-linked themes have underperformed but show building blocks for recovery. He emphasized that disciplined sector rotation and patience will be crucial for generating alpha in the year ahead.