# UPI MDR, insurance reforms and earnings growth: Where Deepak Shenoy sees investment opportunities — retained record

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source: [news](https://highsignal.app/data/news) (news:india-cnbc-tv18)  published 2026-11-13 11:03 ingested 2026-11-14 03:04

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UPI MDR, insurance reforms and earnings growth: Where Deepak Shenoy sees investment opportunities
- Edited byPrashanth
- Published OnNov 13, 2026 | 16:33 IST
- Last Updated OnNov 13, 2026 | 16:33 IST
Merchant acceptance of UPI transaction charges, changes in insurance distribution costs and robust corporate earnings could reshape the investment landscape. Capitalmind Mutual Fund CEO Deepak Shenoy sees potential in term insurance, pharma, mid-cap banks and industrials, while remaining cautious on IT, retail and parts of the FMCG sector.
Changes in the economics of digital payments and insurance, coupled with stronger-than-expected corporate earnings, could create fresh investment opportunities across select sectors, according to Deepak Shenoy, CEO of Capitalmind Mutual Fund. While the introduction of merchant discount rates (MDR) on certain UPI transactions could improve revenue prospects for payment companies and banks, proposed changes in insurance regulations may benefit insurers by altering the economics of distribution.
In an interview with CNBC-TV18, Shenoy explained why merchants may gradually accept MDR charges, how restrictions on payments to insurance intermediaries could improve insurers' profitability, and why pharma, banks and industrials are showing encouraging investment potential.
UPI MDR could improve the economics of digital payments
The introduction of MDR on certain UPI transactions could create an additional revenue stream for companies operating in the digital payments ecosystem. However, the extent of the benefit will depend on how merchants respond to the charges and whether they continue to favour UPI over other payment methods.
Shenoy believes merchant acceptance of MDR could gradually increase, particularly because consumers will not be required to pay the charge. He also pointed out that most small merchants would not come under its purview, limiting the immediate impact on a large section of businesses.
The availability of cash as an alternative could also influence merchant behaviour. Moving away from UPI may prove inconvenient, making merchants more willing to absorb a relatively small charge rather than discourage digital payments.
"Cash is really the only other alternative. If you have to move away from UPI, cash is cumbersome," Shenoy said.
This could limit the impact of MDR on UPI transaction volumes. Merchants may eventually conclude that the convenience of digital payments outweighs the additional cost of accepting certain transactions.
For payment companies, MDR offers a potential revenue stream. However, the benefits may not be distributed equally across the ecosystem. Shenoy pointed out that banks continue to receive the majority of MDR, making the development particularly positive for lenders with significant exposure to UPI as a sourcing channel.
In absolute terms, banks could see a greater increase in profits than some non-bank payment companies. Listed payment players could also benefit, although the eventual distribution of merchant business will determine how much each participant gains.
Insurance reforms could change the profitability equation for insurers
Proposed changes in insurance regulations could have implications beyond distributors and aggregators. Shenoy believes insurance companies themselves could benefit if restrictions on payments to intermediaries give them greater control over their expenses.
A key component of insurers' management expenses is the money paid to intermediaries. According to Shenoy, this includes not only commissions but also other forms of payments that compensate intermediaries, with some distribution partners often receiving preferential treatment.
Limiting these payments could give insurers greater flexibility in managing their expenses and distributing their products. Companies that can sell their own policies rather than depend heavily on external distribution channels could be better placed to benefit.
However, the impact is unlikely to be uniform across insurance segments. Shenoy pointed out that health insurance continues to face a separate challenge, with disputes between hospitals and insurers remaining an important concern.
The more significant opportunity, in his assessment, could lie in term insurance.
Why term insurance could emerge as a bigger opportunity
Term insurance could benefit from the proposed regulatory changes because commissions in this segment are considerably higher, while the segment itself remains relatively underpenetrated.
Shenoy believes its economics make it attractive for both insurance companies and intermediaries specialising in selling such policies. Insurers could benefit from greater opportunities to scale this business, while distributors focused on term insurance could also gain from changes affecting its sale.
"Term insurance is where a lot of profits can come from because the economics generally work better for them," Shenoy said.
While some regulatory changes could affect growth in other insurance segments, term insurance could provide a stronger source of profits. This makes the product mix and distribution strategy of individual insurers important factors in assessing which companies stand to benefit.
Strong earnings growth puts pharma and banks in focus
Beyond the changes in payments and insurance, Shenoy sees encouraging signs in the latest corporate earnings season. With around 90% of earnings reported, he believes the overall performance has been stronger than expected, although there are significant differences across sectors.
One indicator he is tracking is median earnings growth rather than aggregate growth. Large companies have substantial profit pools and can significantly influence overall earnings averages. Median numbers, in his view, offer a better understanding of how companies across the market are performing.
The median earnings growth for the Nifty 500 stands at around 20%, according to Shenoy. Revenue growth has exceeded 18%, while median profit after tax (PAT) and earnings per share (EPS) growth are also above 20%.
Large-cap companies have reported median PAT growth of around 18-19%, while the small-cap segment has performed even better.
The sectoral performance, however, has been mixed. Pharma, auto and auto ancillary companies have delivered attractive results, while mid-cap banks have also reported robust performance. Shenoy said Capitalmind added some pharma and mid-cap banking stocks to its portfolios in October, with further changes likely as more earnings data becomes available.
Industrials have seen some disappointments, while FMCG companies have delivered varied results, with some reporting decent numbers and others posting lacklustre performance. IT and retail have also been relatively weak, although Shenoy said this was broadly in line with expectations.
Based on the earnings performance so far, Shenoy continues to find opportunities in pharma, mid-cap banks, select large-cap banks and industrials. IT, retail and parts of the FMCG sector appear less attractive at present.
For investors, the distinction between headline market performance and the underlying performance of individual businesses remains important. Shenoy's assessment suggests that improving earnings and changes in business economics are creating opportunities in select sectors, rather than across the market as a whole.
Watch accompanying video for full conversation.
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