Should you buy defence or banking stocks now? Kranthi Bathini's sectoral outlook explained

Time of India

07-07-2025

Last week, Indian
equity
markets remained largely range-bound with mild corrections, just as expected. According to Kranthi Bathini, Equity Strategist at WealthMills Securities, the markets are currently in a consolidation phase but are holding strong above the crucial 25,000 Nifty level, which indicates positive sentiment in the short to medium term.
'Despite the tight trading range, the market mood remains optimistic. However, global uncertainties, especially around trade deals involving the US, Japan, and China, have kept both foreign and domestic institutional investors in a wait-and-watch mode,' he said.
President Trump's recent comments on being 'frustrated' with Japanese trade negotiations also caused jitters across Asian markets. Additionally, the upcoming earnings season and global cues are contributing to the market's cautious tone.
Sectoral Outlook: Where to Bet Next
When asked about sectors likely to perform well over the next few months, Bathini pointed to defence, consumption, and financials.
Defence Sector: Riding the Policy Wave
'The recent Rs 1 lakh crore procurement cleared by the Defence Acquisition Council has created momentum.
Stocks
in the defence index, across large and midcaps, are already outperforming,' said Bathini.
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He sees strong order book visibility and earnings potential, especially in sub-segments like drones, aviation, and fighter aircraft. Both PSU and private players look promising for long-term investors, especially on dips.
Consumption: Urban + Rural
With a robust monsoon and potential GST cuts, both rural and urban consumption themes look positive. However, Bathini notes a divergence is emerging with regional players gaining ground, which may not yet be fully reflected in listed stocks.
Financials: Strong Long-Term Play
Bathini believes banking and NBFCs, both public and private, are attractive, especially for long-term investors.
'With a recent rate cut and likely further easing,
liquidity
is improving. This supports
credit
growth, which is essential for infrastructure, capex expansion, and overall economic momentum,' he explained.
He sees potential across largecaps and midcaps, depending on investor's risk appetite and time horizon.
Sectors to Be Cautious About
Bathini remains neutral to cautious on IT and pharma in the short to medium term due to their dependence on global trends and the ongoing trade deal uncertainties.
'Both sectors are heavily linked to US growth. That's a concern right now. But within IT, emerging domestic sub-themes like data centres could be interesting,' he added.
For long-term investors (3+ years), Bathini sees merit in accumulating largecap IT stocks on dips, as they're trading near long-term average valuations.
Defence Exports: A New Growth Driver
India's defence sector is not just focused inwards anymore. 'With ₹25,000 crore in
export
targets this year and growing diplomatic ties with African nations, Indian defence manufacturing could soon find strong international demand,' Bathini noted.
India's cost-efficiency compared to Western nations makes it attractive for defence outsourcing in the future.
Nifty Outlook for this Week (July 7- July 11)
Looking ahead, Bathini expects
volatility
around the India-US trade deal, but remains optimistic.
'As long as Nifty holds 25,300, we're in a good spot. If the earnings season begins on a strong note, we could see the index moving toward 25,750–25,780. A decisive breakout above that range could trigger further upside.'