OmniScience Capital, a portfolio management services firm, has identified public sector undertaking (PSU) banks as offering the highest alpha-generation potential over the medium term, citing clean balance sheets, double-digit growth and significant discounts to intrinsic value.
The firm’s CEO and Chief Investment Strategist, Vikas Gupta, described banking broadly as a sector that is “completely mispriced,” with PSU banks in particular trading well below their intrinsic worth despite delivering double-digit asset and revenue growth and carrying some of their cleanest balance sheets in decades. OmniScience remains overweight across the banking sector, spanning PSU, large private and mid-cap private banks, with mid-cap private banks seen as potentially unlocking valuations earlier and generating higher internal rates of return.
On the broader Indian economy, Gupta said domestic revenue and earnings growth remain healthy despite geopolitical uncertainty, and that a GDP growth rate exceeding 7 per cent is achievable in the current fiscal year. He added that even if the West Asia conflict persists, India could sustain high growth if other supporting factors hold.
The firm is underweight on consumer discretionary, arguing that current valuations already price in substantial future growth, leaving little room for upside. Hotels face a similar constraint, strong fundamentals are not considered sufficient without a meaningful discount to intrinsic value.
Information technology remains a sector to avoid, according to Gupta, primarily due to uncertainty around future workforce requirements and the resulting difficulty in projecting cash flows reliably.
On artificial intelligence, Gupta said any potential bubble is more likely centred on US companies, given that Indian corporates are not deploying capital into AI at comparable levels. He cautioned, however, that the massive investment by global Big Tech firms will ultimately need to translate into tangible revenues and profits.
OmniScience Capital expects markets to increasingly distinguish between companies on the basis of future cash flows, with undervalued businesses seeing valuation improvements while richly priced stocks could stagnate until earnings catch up.
Published on August 21, 2026
Source link
