Veteran investor Raamdeo Agrawal has made a bold prediction for 2026, identifying the auto sector as the market's potential standout performer. Speaking at the CNBC-TV18 Market Forum, Agrawal recommended that investors "buy auto ETF," expressing confidence that "auto will be the star of the year." His forecast comes during a period when investors remain cautious about mid- and small-cap stocks, with market leadership expected to shift toward sectors demonstrating operating leverage and improved demand visibility.

Earnings Growth Drives Optimism

Agrawal's bullish stance on the auto sector is anchored in anticipated earnings momentum recovery. According to Motilal Oswal's analysis covering over 350 companies, aggregate earnings growth is projected to reach approximately 20.00%. This earnings acceleration forms the foundation of his sector-specific optimism.

Government Policy Support

The investor highlighted several supportive government policy measures that create a favorable environment for cyclical sectors. These policy initiatives are expected to benefit the auto sector specifically through improved consumer sentiment and financing conditions.

Key Policy Drivers:

• Monetary easing measures
• Tax relief initiatives
• GST rationalization
• Enhanced financing conditions
• Economic activity pickup

PSU Banks and Large-Cap Preference

Beyond the auto sector, Agrawal maintains a positive outlook on PSU-led investment themes, particularly PSU banks. He emphasized that these institutions offer attractive valuations while delivering earnings growth that significantly outpaces private sector competitors.

"PSU still have lot of steam. They are much more reasonably valued than private sector, and earnings growth is almost 2x of private sector," Agrawal stated during the forum.

Regarding market capitalization preferences, Agrawal favors large-cap stocks over mid- and small-cap alternatives in the current market environment. He believes large-cap stocks are "better positioned to beat the market than the mid and small" cap segments.

Global Macro Concerns

Despite ongoing global uncertainties, including geopolitical tensions and trade disruptions, Agrawal appears largely unperturbed by external factors. Referencing US President Donald Trump's policies, he stated, "Trump doesn't impact me," and quoted Singapore's Prime Minister: "Whatever Trump does, trade will find its own way."

Agrawal acknowledged the complexity of balancing various global factors, noting the simultaneous emergence of artificial intelligence alongside political developments. However, he emphasized his preference for focusing on domestic opportunities and maintaining a long-term investment perspective rooted in understanding familiar markets and sectors.

Motilal Oswal Group Chairman Raamdeo Agrawal has stated that US President Trump's policy decisions do not influence his investment strategy, despite ongoing global market volatility caused by tariff uncertainties. Speaking at the CNBC TV18 Market Forum "The Alpha Generators for 2026", the veteran market expert emphasized his focus on domestic opportunities and familiar investment territories.

Global Interdependence vs Local Focus

Agrawal acknowledged that Trump's decisions have worldwide implications due to increasing market interdependence through multilateral globalization. However, he maintains a clear separation between global macro events and his personal investment approach.

"One side Trump is happening, and on the other side, AI is happening. I don't know how to figure out which one will impact how much. So, I am very happy that I am in India. I do things that I understand, and you need to have a view on four-five things and find ideas out of it," Agrawal explained.

Investment Philosophy and Market Uncertainties

The market veteran described equity as an "exotic" asset class with unique characteristics that distinguish it from other investment options. He emphasized equity's resilience in absorbing various market uncertainties and volatilities.

Entrepreneur Selection Criteria

Agrawal highlighted the critical importance of identifying exceptional entrepreneurs who can perform effectively during challenging market conditions. "Equity has a huge power to take in a lot of uncertainty, and yet, there are few entrepreneurs who can act like a magician and navigate all kinds of risks. We have to find them who can navigate such hard times and deliver earnings," he stated.

The market expert's approach centers on finding business leaders capable of maintaining performance and delivering consistent earnings despite macro-economic headwinds and policy uncertainties from major global economies.