Axis Mutual Fund Sees Selective Equity Opportunities and Attractive Fixed-Income Yields Amid Evolving Market Conditions
by Prashant Kapadia/NHN
Shreyash Devalkar, Head – Equity, and Devang Shah, Head – Fixed Income, highlight the importance of earnings quality, disciplined asset allocation and diversification in navigating market uncertainty
Mumbai, October 28, 2026: As financial markets navigate evolving global economic conditions, geopolitical uncertainties and shifting interest-rate expectations, Axis Mutual Fund believes that disciplined investing, selective stock selection and diversified asset allocation will be key to navigating the next phase of the market cycle. While India’s long-term growth prospects remain supported by domestic demand, manufacturing investments and economic formalisation, investors may need to adopt a more selective approach across equities and fixed income to identify opportunities and build resilient portfolios.
In the equity market, returns are increasingly expected to be driven by earnings quality, business fundamentals and sustainable growth rather than broad-based liquidity-led expansion. At the same time, elevated bond yields are creating opportunities in fixed income, while diversification across equities, debt and precious metals can help investors navigate uncertainty across asset classes.
Shreyash Devalkar, Head – Equity, Axis Mutual Fund, said, “Markets are transitioning from a phase where liquidity alone drove returns to one where business fundamentals and earnings growth will matter far more. In such an environment, opportunities are likely to emerge across sectors and market capitalisations rather than through a broad market rally. We remain constructive on India’s long-term prospects, supported by a favourable domestic growth outlook, ongoing manufacturing investments and increasing formalisation of the economy. For investors, the focus should be on identifying high-quality businesses that can navigate economic cycles while delivering sustainable growth over the long term.”
Equity markets: Broad-based growth opportunities call for selective investing
Axis Mutual Fund believes that opportunities continue to emerge across traditional businesses, platform-led models and manufacturing-oriented sectors. Traditional businesses such as hospitals, diagnostics, airlines and hotels continue to benefit from favourable demand trends and competitive positioning. Platform-led businesses across wealth management, fintech and quick commerce are witnessing improving operating leverage, supporting their growth prospects.
Manufacturing remains a structural opportunity, with sectors such as auto ancillaries, electronics manufacturing services (EMS), defence, power equipment, chemicals and contract manufacturing benefiting from longer-term investment and policy-driven tailwinds.
Emerging themes linked to artificial intelligence (AI)-related data centre investments, physical AI, humanoid robotics, electric vehicle components and power-sector capital expenditure are also attracting attention. Other areas of interest include travel, technology-enabled businesses, hospitals, pharmaceuticals and segments that could benefit from a recovery in credit growth.
From a valuation perspective, the market presents a mixed picture. While several high-growth segments continue to command premium valuations, some large-cap businesses offer relatively attractive valuations despite subdued near-term growth expectations. This divergence reinforces the importance of selectivity and evaluating individual business fundamentals rather than relying solely on benchmark-led allocations.
On the earnings front, revenue growth is expected to remain closely linked to India’s economic cycle, with the potential for improvement as growth conditions strengthen. However, higher raw material and commodity costs could weigh on profitability, making margin management an important differentiator. Companies with strong balance sheets, sustainable growth drivers and the ability to manage costs may be better positioned to navigate changing market conditions.
Fixed income and multi-asset investing: Yield opportunities reinforce the case for diversification
Devang Shah, Head – Fixed Income, Axis Mutual Fund, said, “Interest rates have moved into a zone where fixed income is once again emerging as a meaningful source of portfolio returns. While near-term volatility in yields cannot be ruled out given global and domestic developments, investors can benefit from maintaining a structured approach that balances accrual opportunities with prudent duration management. At the same time, the increasing uncertainty across markets reinforces the importance of diversification. Multi-asset portfolios that combine equities, fixed income and precious metals can help investors participate in growth opportunities while improving portfolio resilience across market cycles.”
The domestic fixed-income landscape continues to offer opportunities, supported by elevated yields and the potential for attractive accrual income across segments of the bond market. However, the trajectory of interest rates will continue to depend on domestic growth, inflation trends, fiscal developments, global bond-market movements and liquidity conditions.
In this environment, a balanced approach across short- to medium-duration strategies may help investors manage interest-rate sensitivity, while a gradual and selective increase in duration exposure could be considered as the rate cycle evolves. Investors may also explore opportunities to benefit from potential gains arising from future interest-rate adjustments, while maintaining flexibility in response to changing macroeconomic conditions.
Beyond fixed income, the case for multi-asset investing has strengthened amid differences in valuations across equity-market segments and continued uncertainty in the global economy. Precious metals are also being influenced by factors such as geopolitical developments, central-bank demand and concerns around global growth.
Multi-asset strategies seek to diversify investments across equities, debt and commodities, reducing dependence on the performance of any single asset class. By combining growth potential, income generation and diversification, these strategies can help investors manage portfolio volatility and navigate different market cycles.
Disciplined investing remains central to long-term portfolio construction
The evolving market environment highlights the importance of a balanced and disciplined investment approach. Within equities, identifying businesses with sound fundamentals, earnings visibility and sustainable growth prospects remains important. Within fixed income, investors may benefit from focusing on yield opportunities while managing duration and interest-rate risks. Across asset classes, diversification and appropriate asset allocation can help reduce concentration risk and support portfolio resilience.
Rather than attempting to predict short-term market movements, Axis Mutual Fund believes that investors should focus on their individual financial goals, investment horizons and risk tolerance while building portfolios suited to changing economic conditions.
Source: BSE, NSE Indices, Bloomberg, RBI and Axis MF Internal Research.
Note: The sectors and investment themes mentioned above are illustrative and are intended only to explain the prevailing market environment. They should not be construed as recommendations or used for the development or implementation of any investment strategy. This communication does not constitute investment advice. Past performance may or may not be sustained in the future.
Disclaimer: This document represents the views of Axis Asset Management Company Ltd. (Axis AMC) and must not be taken as the basis for any investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its directors or associates shall be liable for any damages, including lost revenue or lost profits, arising from the use of the information contained herein.
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