Top Indian Stocks to Watch: Bernstein’s Latest Picks

Bernstein highlighted four Indian stock opportunities, led by NTPC, Power Grid, Muthoot Finance, and Paytm, citing strong fundamentals and growth visibility. The firm expects India's power demand to grow at a 6.4% CAGR from 2025-2030 and sees about $40 billion per year of generation investment, with NTPC benefiting from thermal, nuclear, and renewable expansion. Muthoot is projected to deliver over 40% asset growth in FY2026, while Paytm could see EPS rise from roughly INR 9 in FY2026 to INR 82 by FY2030.

Analysis

The more interesting signal here is not “utilities and fintech are good,” but that India’s capex cycle is becoming self-reinforcing: grid buildout, balancing thermal, and nuclear optionality create a multi-year earnings runway that is less sensitive to spot macro than most EM infrastructure stories. That favors the platform incumbents with cheap funding and policy access, while squeezing smaller private developers that lack balance-sheet capacity to absorb longer gestation periods and execution slippage.

In power, the second-order winner is the equipment and EPC ecosystem rather than just the regulated owners. A sustained step-up in generation and transmission spend should pull through orders for transformers, switchgear, cabling, and project services, but margins may lag because capacity is already being repriced into the cycle; the cleaner trade is on businesses with duration and low leverage, not on pure construction names. The market is likely underestimating how much right-of-way normalization can compress project delays, which should reduce working-capital drag and lift ROIC faster than headline capex growth implies.

In fintech, the key divergence is between distribution-heavy platforms and balance-sheet lenders. A payments franchise that is converting merchant acquisition into lending and cross-sell can compound far faster than consensus models assume, but the path will be volatile: regulatory noise, take-rate pressure, and credit losses can all interrupt the re-rating before the operating leverage shows up. Gold lending is a different animal—high gold prices boost collateral value and growth, but they also raise the risk of a crowded trade if lenders loosen underwriting too aggressively into the cycle.

Contrarianly, the cleanest bullish setup may be the least loved utilities, not the higher-beta fintech names. The market tends to pay up for visible growth in payments, but utility earnings from capex-heavy expansion can rerate quietly if execution stays clean for 2-3 quarters; by contrast, any stumble in payments monetization can de-rate the name sharply because the valuation already discounts a long growth runway.

Key Decisions for Investors

• Long NTPC vs Indian private power developers for 6-12 months: express the view that balance-sheet strength and access to capital will outperform execution-fragile competitors as the capex cycle broadens; target a 15-20% relative return with downside capped by regulated cash flows.
• Long Power Grid on 3-9 month horizon: add on dips after any capex-guidance skepticism, because improving right-of-way execution should translate into earlier asset capitalization and better-than-modeled earnings conversion; use a 10-15% trailing stop.
• Pair trade: long NTPC / short a basket of leveraged renewable developers over 6-12 months to isolate the winners from the capex cycle; risk is policy acceleration that narrows the funding advantage, so keep gross exposure modest.
• Long Muthoot Finance for 3-6 months only if gold remains elevated; the trade works on collateral-value expansion and operating leverage, but trim aggressively if gold stalls or if peer lending growth becomes crowded. Expect upside skew of ~20% with sharp gap risk on regulatory headlines.
• Long Paytm with defined-risk options rather than outright equity: buy 12-18 month calls to capture the non-linear earnings inflection while limiting drawdown from execution/regulatory volatility; this is a high convexity, high headline-risk trade.