Amid a volatile equity landscape and cautious investor sentiment, Rajesh Bhatia, Chief Investment Officer of ITI Mutual Fund, has offered a nuanced view on sectoral opportunities for long-term investors. In a recent interview, Bhatia emphasized the structural strength of India’s defence sector and advised accumulating quality defence stocks during market corrections. He also expressed optimism about private banks, forecasting a potential earnings acceleration in FY27 as interest rate cycles normalize and credit growth rebounds.
Bhatia’s commentary comes at a time when defence stocks have seen sharp rallies followed by profit-booking, while private banks continue to underperform broader indices. His insights offer a roadmap for investors seeking to balance short-term caution with long-term conviction.
🛡️ Defence Sector: A Long-Term Play, Not a Sprint
Bhatia believes the defence sector is entering a multi-decade growth cycle, driven by geopolitical imperatives, government policy support, and rising budget allocations. However, he cautions that many defence stocks are currently “priced to perfection,” making it prudent to wait for dips before entering.
“It’s a no-brainer that defence spending will rise over the next 10–15 years. But valuations are stretched. Investors should wait for corrections and focus on companies with strong moats,” Bhatia said.
| Defence Stock | CMP (₹) | 1-Year Return (%) | Valuation Status | Suggested Action |
|---|---|---|---|---|
| Bharat Electronics Ltd (BEL) | 162 | +48.2 | Fairly Valued | Accumulate on dips |
| Hindustan Aeronautics Ltd (HAL) | 3,980 | +72.5 | Overvalued | Wait for correction |
| Bharat Dynamics Ltd (BDL) | 1,360 | +65.1 | Fairly Valued | Long-term hold |
| Garden Reach Shipbuilders (GRSE) | 1,020 | +58.3 | Slightly Overvalued | Accumulate gradually |
The Defence Acquisition Council (DAC) recently cleared procurements worth ₹67,000 crore, reinforcing the sector’s visibility. However, Bhatia advises investors to avoid chasing momentum and instead focus on fundamentals, order book strength, and execution capabilities.
🧭 Private Banks: FY27 Could Be the Inflection Point
While private banks have lagged in recent quarters due to margin compression and asset repricing, Bhatia expects a turnaround in FY27. He attributes the current slowdown to the lag between falling interest rates and liability repricing, which has temporarily pressured net interest margins (NIMs).
“The first half of FY26 may remain muted, but FY27 could see acceleration as liabilities reprice and credit demand picks up,” Bhatia noted.
| Private Bank | CMP (₹) | FY25 EPS Growth (%) | FY27 Outlook | Investment View |
|---|---|---|---|---|
| ICICI Bank | 1,050 | +9.2 | Strong | Accumulate |
| HDFC Bank | 1,720 | +6.5 | Improving | Long-term hold |
| Axis Bank | 1,140 | +5.8 | Positive | Accumulate on dips |
| Federal Bank | 162 | +4.3 | High Growth | High-risk, high-reward |
Bhatia emphasized that private banks with robust retail franchises, digital capabilities, and diversified loan books are best positioned to benefit from the next credit cycle.
📉 Market Context: Range-Bound but Resilient
Despite global headwinds and domestic policy transitions, Bhatia remains optimistic about India’s macroeconomic stability. He believes that reforms such as GST rationalization, interest rate cuts, and infrastructure spending will support earnings recovery in FY26 and FY27.
| Macro Indicator | Current Status | FY27 Projection | Market Implication |
|---|---|---|---|
| GDP Growth | 6.8% (FY25 est.) | 7.5% (FY27 target) | Earnings expansion |
| Inflation | 4.6% (CPI July 2025) | 4.2% (FY27 est.) | Rate cut potential |
| Repo Rate | 5.75% | 5.25% (FY26 est.) | Margin recovery |
| Fiscal Deficit | 5.8% of GDP | 5.2% (FY27 target) | Policy headroom |
Bhatia also highlighted the importance of staying invested in quality companies with proven business models, especially in sectors like auto, capital goods, and consumer durables.
🚗 Auto Sector: Ignore GST Noise, Focus on Market Share
While the auto sector awaits clarity on GST rate cuts, Bhatia recommends focusing on companies gaining market share irrespective of policy changes. He believes that structural trends such as EV adoption, premiumization, and rural recovery will drive long-term growth.
| Auto Stock | CMP (₹) | Market Share Trend | GST Sensitivity | Investment View |
|---|---|---|---|---|
| Maruti Suzuki | 14,250 | Stable | High | Neutral |
| Mahindra & Mahindra | 3,354 | Rising | Moderate | Accumulate |
| Ashok Leyland | 133 | Improving | Moderate | Buy on dips |
| TVS Motor | 3,252 | Stable | Low | Hold |
Bhatia noted that GST cuts, if implemented, could act as a demand catalyst, but investors should not base decisions solely on policy speculation.
🧠 Investment Strategy: Patience, Discipline, and Allocation
Bhatia’s overarching advice is to maintain discipline and avoid chasing short-term rallies. He recommends a barbell strategy—combining high-growth sectors like defence and auto with stable compounders in banking and FMCG.
| Strategy Component | Sector Focus | Allocation (%) | Risk Profile |
|---|---|---|---|
| High Growth | Defence, Auto | 40% | Moderate to High |
| Stable Compounders | Private Banks, FMCG | 40% | Low to Moderate |
| Tactical Plays | Infra, PSU Banks | 20% | High |
He also advises using market corrections to accumulate quality stocks, especially in sectors with long-term visibility and policy tailwinds.
📌 Conclusion
Rajesh Bhatia’s sectoral outlook offers a balanced roadmap for navigating India’s evolving equity landscape. His conviction in defence stocks—tempered by valuation caution—and his optimism about private banks in FY27 reflect a strategic approach rooted in macro awareness and business fundamentals.
For investors seeking clarity amid market noise, Bhatia’s advice is clear: buy defence stocks on dips, stay patient with private banks, and focus on companies that can deliver across cycles.
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Disclaimer: This article is based on publicly available expert commentary and financial data as of August 21, 2025. It is intended for informational purposes only and does not constitute investment advice.
