Indian investors may move to safer bets amid structural challenges: Experts

It may be a safe decision to invest in FMCG, Pharma, IT and Telecom stocks given their historical performance at a time when India is set to face structural challenges to its growth story, said experts at Ambit Institutional Equities.

Further, bank, cement and IT stocks are tactical plays, the experts continued. The call became important when economists started being vocal about rising concerns of structural challenges in the economic growth process and concentrated stock ownership in higher-risk small and mid-cap stocks by retail investors.

Stock market concentration is expected to increase further as small and mid-cap stocks are trading at higher prices than their earnings, signifying a downward risk, said Bharat Arora, Director of Strategy research at Ambit.

Indian economy’s structural challenges remain even as global uncertainties subside, according to analysts.

“We argue that India may be trapped in a ‘low equilibrium’ growth path, where official growth figures overstate underlying economic strength, while weak consumption, slowing productivity, and limited job creation leave the economy vulnerable to external shocks and rising stagflation risks,” said Dhananjay Sinha, CEO and Head of Institutional Equities at Systematix Group, in a research note.

The Indian economy has seen among the worst bouts of capital repatriation, with foreign institutional investors selling more than ₹2.8 lakh crore in 2026, as earnings of the companies do not justify the prices and their returns in dollars are in the lower single digits.

Consumption demand is uneven across households, and the government balance sheet lacks space for fiscal consolidation, said Swayamsiddha Panda, Economist at Ambit Institutional Equities. Post-pandemic consumption boomed on formal hiring, and credit and that engine has slowed now, she continued.

“Without addressing the income crisis, reviving broad-based private investment, and bridging the organised-informal divide, India risks remaining trapped in a low growth equilibrium, ill-equipped for the shocks ahead. The time for denial is over; the ground realities demand decisive action,” the Systematix report read.

Further, the research team of the Bernstein group, a global financial services firm, wrote a letter to the Prime Minister of India, in which it wrote, “But if the last six years demonstrate what India can do when policy is aligned, they also carry a risk: the temptation to extrapolate recent success and underplay how much further there is to go… The cost of delay is no longer just slower growth—it is long-term dependence.” The researchers added that “sharper willingness to take difficult decisions early,” was required now rather than defer them and that the window for that is open but narrowing.