Apart from the geopolitical overhang, what will be the key drivers for markets ahead?
The most important factor will be corporate earnings delivery, especially whether companies are able to protect margins and sustain growth in an environment of higher input costs and uneven global demand. Financials, capital goods, manufacturing-linked businesses, and select consumption segments will be closely watched, as they remain central to the earnings cycle. Alongside this, Reserve Bank of India’s policy signals, inflation trends and liquidity conditions will shape near-term sentiment, particularly for sectors such as banks, autos, and real estate. Beyond earnings, macros will also be a driver and the elevated crude oil prices may impact the current account deficit and lead to higher inflation and lower growth. Stability of rupee is key indicator for the same.
Which sectors’ stocks did you add the most during the recent correction?
We used the decline to add to segments where valuations became more reasonable and earnings visibility remained intact. The incremental additions were in domestic-oriented sectors, particularly banking as well as parts of consumer discretionary,
capital goods, and manufacturing-linked businesses, where balance sheets are strong and medium-term growth drivers remain supportive. We stayed cautious on sectors such as consumer staples, where margins remain vulnerable to input cost pressures or where the earnings outlook is still unclear.
How do you see the banking and IT sector currently?
On banking, our view remains positive. The sector is well capitalised, asset quality trends are stable, and credit growth continues to be supported by domestic demand and ongoing capex. Valuations, especially in large private banks, have become more reasonable post the correction, making the risk reward attractive over a medium-term horizon. Information technology (IT), on the other hand, presents a muted picture. While valuations have improved and the sector does have companies with strong balance sheets, near-term growth is still constrained by global slowdown concerns and cautious client spending. We see IT as more of a gradual accumulation opportunity rather than immediate earnings-led recovery theme, with stock selection being key.
Do you expect foreign portfolio investor (FPI) flows to return now that geopolitical tensions have eased?
There are early signs that FPI flows could start stabilising and gradually improve, but a quick or sustained return will depend on currency stability. Easing geopolitical tensions have helped improve global risk appetite, soften crude prices, and led to sporadic bouts of FPI buying. That said, foreign investors remain cautious, and flows are still highly sensitive to the outlook on crude, currency stability, and global growth conditions.
How do you assess market valuations after recent volatility?
Valuations look more balanced, though not uniformly cheap. The sharp correction in March has brought largecap indices closer to long-term averages. The rebound seen in April suggests that markets are beginning to reassess risks as immediate concerns ease. That said, valuation comfort is uneven across the market. Large caps and select cyclicals now appear more reasonably priced after the correction, while pockets of mid and smallcaps have seen a faster recovery.
What are your earnings growth expectations for this financial year?
We expect earnings growth to be in the early double digits, though it is likely to be uneven across the year and across sectors. It also depends on the longevity of raw material price inflation due to supply constraints. Expectations have moderated from earlier mid-teen levels due to higher input costs, energy-related pressures, and global uncertainty, which could keep earnings growth more subdued in the first half.
What would you advise investors to do at this stage — take a staggered approach or wait for further clarity on the conflict?
A staggered approach is more appropriate than waiting for complete clarity. In periods of geopolitical uncertainty, markets tend to move sharply on news flow, and by the time there is clear resolution, a large part of the recovery is often already priced in. For investors — especially those with medium- to long-term goals — trying to time the perfect entry usually adds more risk than value.
