‘India heading for a capex boom’: LIC MF’s Yogesh Patil bullish on banks, power & defence

India’s equity market is poised for a strong multi-year expansion backed by structural reforms, rising private investment and robust consumption trends, says Yogesh Patil, Chief Investment Officer (Equity) at LIC Mutual Fund.

Speaking to Business Today, Patil said the Indian economy is heading for a capex boom, with sectors such as power, defence, data centres and industrial manufacturing emerging as key beneficiaries. 

Patil noted bullishness on the market, citing strong structural drivers such as rising investments. He highlighted robust capital flows into sectors including power, transmission and distribution, data centres, industries, and specialty chemicals.

Patil highlighted that India is gaining ground as a credible manufacturing hub in the global supply chain, aided by China-plus-one strategies and import substitution. “In the last 20 years, India was nowhere in engineering or exports. But today, India is actually reaching somewhere,” he said, adding that the manufacturing and financialisation cycles are aligning to support sustained growth.

According to Patil, the macroeconomic backdrop remains favourable. “India can deliver double-digit CAGR over the next five years. We have a strong demographic advantage, a stable macro environment, and a reduced current account vulnerability,” he said, pointing out that lower crude oil dependence and a more stable rupee have improved the country’s economic resilience.

LIC Mutual Fund has recently raised its exposure to leading private and public sector banks, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and SBI. Patil said the NPA cycle is at its lowest in a decade, and credit quality has improved significantly.

“The sector valuations are very attractive compared to last year… and profitability as a percentage of GDP has increased to around 5 per cent in the last two years,” he said. “Consumer banking will be the major growth driver for the next 10–20 years.”

Patil believes the banking system is in its healthiest shape in years, with corporate debt levels at a 15-year low and improved regulatory oversight. “There are no major shocks in the system. The environment is healthy, credit quality is strong, and valuations remain reasonable,” he said.

On the non-banking side, Patil said LIC MF favours NBFCs with strong liability franchises and prudent management teams. “The companies that have sufficient capital, manpower and systems in place will capture the next leg of growth,” he said.

He pointed out that consumption-driven lending, especially among MSMEs and SMEs, is emerging as a key theme within the NBFC space.

While acknowledging the sector’s importance, Patil said LIC MF remains underweight on IT stocks, citing a lack of clarity around spending trends and margin outlook.

“The direction of IT spending has shifted towards AI and new technologies where Indian companies have limited exposure,” he said. “Most of the recent deal wins are cost take-out contracts with lower margins. We need to see how domestic players adapt to the global technology shift.”

Outside BFSI, Patil said LIC MF is bullish on industrials, capital goods and defence, expecting significant capital expenditure in these areas over the next five years.

“Capex in power, defence, EMS and data centres could rise 3–4x in the next five years, driven by regulatory needs and growing domestic demand,” he said. 

Patil also pointed to defence indigenisation as a major theme. “We are positive on defence, particularly on the electronics side where India aims to reduce dependency on imports,” he said. BEL and Apollo Microsystems are among LIC MF’s key holdings in the space.

Overall, Patil expects India’s corporate balance sheets and profitability quality to remain strong, supported by policy tailwinds and rising domestic demand. “The environment is conducive for growth. With macros stable and structural reforms in place, we believe India is well-positioned for the next phase of wealth creation,” he added.