Radhika Gupta, Edelweiss: 'Hopefully, The Worst Is Behind Us'

'Investors shouldn't let fear dictate their decisions. The most important step is simply to begin investing.'

It has been a volatile first half of calendar year 2026 for the markets.

As they enter the second half of 2026, Radhika Gupta, managing director and chief executive officer at Edelweiss Mutual Fund, told Puneet Wadhwa/Business Standard in an in-person interview in New Delhi that markets typically are either portrayed as unstoppable or extremely fragile, whereas the truth generally lies somewhere in between.

Markets seem to be entering one crisis after another -- from the West Asia war to concerns regarding a weak monsoon and tepid corporate earnings back home. To what extent is the bad news, if any, on the domestic front priced in?

At the start of 2026, we believed India would emerge as a relative outperformer.

Expectations were building that earnings growth was returning, and we saw early signs of that in the first quarter (January to March 2026).

Foreign institutional investor (FII) flows also started improving around February.

Then, the West Asia crisis unfolded. Crude oil prices crossed $100 a barrel, which is never good for India.

As a result, I don't expect first-quarter earnings to be particularly strong because they would have reflected the impact of elevated oil prices.

That said, I believe the market has largely priced in a muted first quarter as regards corporate earnings.

With crude now back around $70 a barrel, one of the biggest risks for India has eased.

That said, markets are never free of risk, but the existential concern around sharply higher oil prices appears to be behind us.

The government's measures, including those related to FCNR deposits, have been positive and should help attract meaningful capital inflows.

Hopefully, the worst is behind us, second-quarter earnings improve, and the earnings recovery that we expected earlier this year materialises in the second half.

'Markets never reach a stage where every risk is priced in'

Would you describe Indian markets as fragile at the moment?

No, I wouldn't. I think the broader ecosystem tends to oscillate between excessive optimism and excessive pessimism.

Markets are either portrayed as unstoppable or extremely fragile, whereas the truth generally lies somewhere in between. I would describe India as being in a fairly balanced position right now.

Valuations are broadly reasonable. Economic growth remains faster than that of many other major economies.

We continue to benefit from a favourable demographic profile that should support growth for years to come.

Most importantly, I remain a strong believer in Indian entrepreneurship. Ultimately, that is the foundation of long-term wealth creation and economic progress.

What risks do you believe are still not priced into the market?

The monsoon remains an uncertainty. We simply don't know how it will play out. Global interest rates also remain elevated.

While India has seen a healthy pipeline of initial public offers (IPOs), there are also several large global IPOs that could absorb liquidity.

Markets never reach a stage where every risk is priced in. There are always unknown unknowns.

How comfortable are you with current valuations? Is there room for a de-rating?

If you look at the past two years, the broader market hasn't delivered extraordinary returns.

Large-cap valuations are broadly around their historical averages.

Small-cap valuations corrected before witnessing a recent rally.

Mid-cap valuations are not cheap, but they are also close to long-term averages.

So, are valuations frothy? I would say no. Are they extremely cheap? Also no. But they are certainly in a better place than they have been for some time.

'SIP is one of the best investment tools available to retail investors'

We remain positive on financials as credit growth appears to be recovering, while capital market-related businesses have continued to perform well. We also like power and defence.

The recent geopolitical developments have reinforced the importance of energy security and defence preparedness. Certain segments of premium consumption also remain attractive.

On the other hand, we are relatively cautious on information technology.

We're certainly not writing off the Indian IT industry, but we would like to see how the current transition unfolds.

We also remain watchful on parts of the staple consumption space given the impact that higher crude prices could have on earnings.

Is cash king right now, or should investors start deploying money?

Investors consistently struggle with market timing, and frankly, so do fund managers.

We don't make cash calls in our own funds because markets typically move ahead of earnings cycles.

By the time earnings improve, markets have usually already priced in the recovery.

That's why I have always believed that the SIP (Systematic Investment Plan) is one of the best investment tools available to retail investors. It was designed precisely to solve the problem of market timing.

History also supports this approach. Whenever markets have remained largely flat over a two-year period, the subsequent 18 to 24 months have generally delivered significantly better returns.

Therefore, investors should gradually deploy cash while maintaining their desired asset allocation.

More importantly, they should stay disciplined with their SIPs rather than trying to predict market tops and bottoms.

'Not every year has to be a year of rapid growth for SIPs'

SIP account closures have outpaced new account openings in recent months, while monthly SIP inflows have moderated. As a fund manager, how concerned are you?

Not very concerned. I joined the industry in 2017 when the monthly SIP book was around ₹4,000 crore.

Today, it is over ₹30,000 crore. For years, people have predicted that a market correction would cause SIPs to disappear, but that hasn't happened.

Not every year has to be a year of rapid growth for SIPs. There are phases of consolidation, and I believe we are currently going through one.

Even after two years of relatively flat market returns, maintaining a monthly SIP book of over ₹30,000 crore is, in my view, a positive sign.

If you look at the number of accounts, new openings and closures are broadly similar, with closures only marginally exceeding new additions.

Given the market environment, I don't think that is alarming.

Equity inflows have slowed somewhat, but the encouraging part is that we are not witnessing large-scale redemptions.

In earlier market downturns, investors tended to exit equities aggressively. That isn't happening today.

In fact, during March and April, many investors withdrew money from debt and arbitrage funds to increase their allocation to equities. So far, that decision has worked in their favour.

Overall, I believe investor behaviour has matured considerably. Some volatility in flows is natural, but nothing I see today causes significant concern.

SIP versus SIF (Specialised Investment Fund)? Where are the investors tilting?

I don't think it's a case of SIP versus SIF at all. While I've always been a strong believer in SIPs, SIF represents a bridge between traditional mutual funds and products like PMS and AIFs.

It caters to investors who have evolved beyond conventional mutual funds and are looking for more sophisticated investment strategies, while still benefiting from greater transparency and tax efficiency.

In many ways, our brand philosophy has always been inspired by alternative investing, and SIF is a natural extension of that thinking.

Rather than replacing mutual funds, SIFs will coexist with them by offering investors an additional risk-return profile.

For our own business, I believe SIF assets could reach between ₹15,000 crore and ₹20,000 crore by the end of the current financial year.

At the industry level, I think ₹50,000 crore is an achievable target, provided the industry develops in the right way.

That will require asset managers to launch differentiated products rather than simply copying one another.

More importantly, they must deliver consistent performance while setting realistic expectations for investors.

If those conditions are met, I don't see why SIF cannot evolve into a ₹50,000-crore asset class over time.

'My first piece of advice is simple: Don't delay investing'

The RBI's latest Financial Stability Report found that 44 open-ended debt mutual fund schemes breached prescribed liquidity thresholds in its stress tests. If similar stress tests were conducted on mid- and small-cap equity funds, what do you think the outcome would be?

We already conduct stress tests for mid- and small-cap funds, and the regulator publishes those results.

Liquidity has always been a key area of focus for us. We manage one of the industry's largest mid-cap funds, yet our estimated liquidation period is typically only a few days.

Different fund houses have different approaches to liquidity management, but we've always been extremely conscious of maintaining adequate liquidity.

I don't see anything particularly worrying at this stage.

Has artificial intelligence changed your view on Indian IT companies?

We're currently in a wait-and-watch phase. Although we've been relatively underweight on IT in our portfolios, we're certainly not writing off the Indian IT services industry.

We believe the sector is undergoing a transition. Companies need to reskill their workforce, adapt their business models and identify ways to benefit from AI adoption rather than be disrupted by it.

India wasn't a major participant in the first phase of the AI revolution, which was largely centred on developing large language models.

However, I believe India could become a significant beneficiary in the second phase, where the focus shifts towards building applications using AI.

Over time, we'll gain a clearer understanding of how much value ultimately accrues to IT services companies and how the balance between capital expenditure and revenue opportunities evolves.

What would you advise someone who is just beginning their investment journey?

My first piece of advice is simple: Don't delay investing. There is a lot of unnecessary scepticism in the market today.

Investing ultimately requires a long-term perspective and a reasonable degree of optimism. Without that, it becomes very difficult to create wealth.

India continues to be one of the fastest-growing major economies in the world.

If nominal GDP grows at around 10-11 per cent, investors should be able to earn meaningful long-term returns in Indian equities.

The important thing is to keep the facts in perspective.

We have a tendency to swing between extremes -- either believing the Sensex is headed to extraordinary levels or assuming the economy has become extremely fragile.

The reality usually lies somewhere in the middle. Investors shouldn't let fear dictate their decisions. The most important step is simply to begin investing.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.