Earnings visibility to drive markets; Axis MF’s Karthik Kumar underweight IT, bullish on autos

Earnings visibility will now drive the direction of Indian equities, and Axis Mutual Fund is positioning portfolios accordingly, underweight IT and favouring autos, financials and power transmission companies, according to Karthik Kumar, Fund Manager at Axis Mutual Fund.

“The earnings growth over the next few quarters, and the visibility and clarity of earnings… will dictate how our markets kind of move on from here,” Kumar said, stating that markets are shifting toward a growth-at-a-reasonable-price (GARP) approach.

The average assets under management (AAUM) of Axis Mutual Fund for the October–December 2025 quarter stood at around $40 billion.

In that context, the fund remains cautious on IT despite the correction. “We continue to be underweight as it stands right now… the growth prospects over this year or the next couple of financial years look quite mediocre,” he said. Valuations have improved after recent underperformance, but “we need near-term triggers for the sector to recover.”

He also cautioned against overstating the impact of artificial intelligence (AI) on platform companies. The effects should be monitored, but “I don’t think we need to go to that extreme conclusion.”

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Kumar is more constructive on domestic cyclicals. “We continue to remain bullish on autos… both two wheelers and four wheelers,” he said, citing supportive demand data for the next couple of quarters. The fund is also overweight in financials and power transmission and distribution companies, where earnings visibility is stronger.

He noted the weak start to the year follows historical trends, while foreign investor selling has slowed and valuations have improved after India’s recent underperformance versus other emerging markets.

Among corrected sectors, he sees selective opportunities in defence stocks due to better valuations and “growth certainty over 2027-28 (FY28),” though railway stocks still do not meet his quantitative filters. The fund remains cautious on chemicals and textiles due to policy uncertainty, and underweight staples, utilities and some commodity names.

Also Read: AI may cut IT costs but push companies to spend more on tech: Axis AMC

Beyond equities, Kumar recommends diversification into precious metals. “We remain constructive on both those asset classes… investors should have allocation to gold and silver,” he said, citing a longer-term structural case.

For the entire interview, watch the accompanying video

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