India is poised to be a significant beneficiary of foreign investor inflows, particularly as the US economy potentially slows down amidst rising global trade tensions. This is according to Yogesh Patil, the Chief Investment Officer (CIO) for Equity at LIC Mutual Fund Asset Management Ltd. He suggests that a stock-specific investment approach would be more beneficial in the current environment.

Patil believes that India's favorable position stems from a combination of factors. A sustained period of low inflation, coupled with a consistent supply of domestic risk capital, is expected to act as a tailwind for the Indian equity markets. This is further supported by expectations of strong earnings growth from Indian companies. He highlighted that India's GDP and earnings growth are anticipated to remain above the global average and relatively robust compared to other emerging markets. This makes India an attractive destination for global capital seeking higher returns.

While the overall outlook appears bright, Patil anticipates continued market volatility in the near term. This volatility will likely be driven by a confluence of factors including liquidity dynamics, evolving economic outlooks, and ongoing geopolitical developments. Despite these potential short-term fluctuations, he maintains a positive long-term perspective on the Indian market, driven primarily by capital expenditure (capex), with consumption growth expected to balance the economy.

Regarding specific sectors, Patil suggests that capital goods, pharmaceuticals, IT exports, banks, and non-banking financial companies (NBFCs) are likely to outperform in the medium term. These sectors are expected to demonstrate strong and sustainable earnings visibility, making them well-positioned to navigate the current market dynamics and deliver consistent performance.

When asked about the right investment strategy for the current market, Patil emphasized the importance of focusing on earnings growth and its trajectory. He advises investors to analyze broader economic trends and identify sectors or specific opportunities where growth is likely to outpace nominal GDP. This approach, he believes, is crucial for building long-term wealth.

In December 2024, Patil noted the domestic stock markets were regaining momentum after a period of decline. Foreign institutional investors (FIIs) had also returned, making substantial purchases after a period of net outflows. He had suggested that sectors such as capital goods, pharmaceuticals, IT exports, banks, and non-banking financial companies may outperform in the medium term, because these sectors may demonstrate earnings visibility and sustainability.

Patil also addressed concerns about potential impacts from global events. He noted there was a widespread expectation that a Trump victory may indicate an increase in US tariffs on imported goods.