Large-cap IT will bounce back, but recovery is still a few quarters away: Rohit Aggarwal, Ro Fund Management

Rohit Aggarwal, Founder and CIO at Ro Fund Management, in an interview with Upstox News, said as long as earnings remain healthy, Indian equities are likely to become increasingly resilient to war-related volatility. He also remains bullish on energy, consumer discretionary and pharma.

However, for the second half of 2026, Aggarwal will continue to focus on infrastructure and manufacturing firms. Overall, he expects FY27 and FY28 growth rates should be strong across various sectors.

Investors are preparing for continued volatility but are also assuming that a full-scale war is behind us.  As long as global energy supply flows continue without major disruption, I believe the Indian economy remains resilient.  The last quarter delivered a positive earnings surprise. As long as earnings remain healthy, Indian equities are likely to become increasingly resilient to war-related volatility. The key risks to monitor will be any sustained disruption to energy markets, a sharp rise in inflation, or a meaningful slowdown in corporate earnings.

Midcap stocks posted strong earnings. I believe small and midcap stocks could continue to outperform over the next few quarters. Certain sectors may become richly valued, but this is a natural part of an upcycle. Investors should remain selective rather than assume every company within the segment will perform equally well.

We are bullish on energy, consumer discretionary and pharma. We have reduced our weight in BSFI and have very little exposure to IT. The long- term macro themes favour the sectors where we are overweight. Large-cap IT will bounce back, but we believe greater earnings visibility is needed, and the recovery may still be a few quarters away.

Large IT companies have fallen behind global technology leaders as they continue to operate primarily as service businesses rather than platform or product innovators. They are not part of the global excitement around AI and next-generation technology. However, these companies are cash-rich and have strong management teams. I suspect we will start seeing more forward-looking acquisitions by these companies in the US and Europe, helping strengthen their AI and digital capabilities. Their recovery and innovation cycle may still be a few quarters away, but we cannot write them off. They will emerge strong again.

I think the focus on infrastructure and manufacturing will continue. Companies are committing significant capex and the results of that will begin to show.  One of the biggest opportunities over the next few years will be the broader energy ecosystem. 

We may see some disappointment with energy-dependent sectors due to the continued tensions in the Middle East and the effect of the recent conflict. I think banks will deliver broadly in line with expectations and may remain relatively subdued; however, I’m bullish on manufacturing, especially within small-cap stocks, where earnings momentum remains encouraging. Overall FY27 and FY28 growth rates should be strong across various sectors, but we are a bottom-up stock-picking market and the performance differential between stocks will be large even within the same sectors.