In an exclusive interview with Republic Business, AK Prabhakar, Head of Research at IDBI Capital, remains cautiously optimistic, citing the resilience of India's Red Sea exports and positive market sentiment ahead of upcoming elections globally, albeit with a note of caution regarding euphoric valuations.

Prabhakar underscored the remarkable performance of mid-cap and small-cap stocks, which have consistently outpaced the Nifty index.

Prabhakar highlighted the robust performance of PSU entities, particularly in defence and power sectors. Despite challenges faced by private banks due to increased cost of funds, he identified attractive opportunities in certain PSU banks, notably State Bank of India.

Turning to individual stocks, Prabhakar discussed the recent surge in valuation of PSU stocks such as REC and PFC, stressing on potential opportunities in larger PSU banks.

On Reliance Industries, Prabhakar noted its stability and moderate returns over time. He anticipated significant value unlocking with the impending demerger, given the conglomerate's diversified business interests.

Regarding HDFC Bank, Prabhakar acknowledged its lagging performance in the recent market rally but remained optimistic about its long-term potential despite short-term challenges stemming from an aggressive expansion strategy.

On auto sector, Prabhakar attributed rally in Tata Motors and Mahindra & Mahindra to the surge in SUV sales, highlighting Tata Motors' global presence and substantial R&D investments as key drivers of sustained growth.