In a context of growing global uncertainty and volatility In stock marketsinvestors are increasingly looking for strategies that can help them weather turbulence without compromising long-term wealth creation.Geopolitical tensions in the Middle East currency pressures and fluctuations in crude prices, several macroeconomic factors are currently shaping walk sentiment and capital flows.
In this edition of ETMarkets Smart Talk, Chandraprakash Padiyarsenior fund manager at Tata Asset Management, shares his insights on markets, sectors and investment strategy in the current environment.
The fund manager believes that while short-term volatility may persist due to geopolitical developments, India’s long-term growth remains intact.
In such an environment, he suggests investors to remain disciplined and continue to invest in diversified categories such as flexicap and multicap funds, which can help manage risk while capturing opportunities across all market segments.
In conversation with Kshitij Anand, Padiyar also discusses the outlook for foreign flows, the impact of crude prices and foreign exchange movements, sectoral opportunities such as banking and how investors should recalibrate their portfolios in the face of market fluctuations. Edited extracts –
Q) March has been a roller coaster ride for the stock markets, not just in India but across the globe. How do you see the markets – more difficulties ahead?
A) The geopolitical situation in the Middle East poses a serious problem for global supply chains. Our feeling is different from past events: this time the entire Middle East is directly involved, leading to logistics/supply chain issues for businesses around the world. We hope that the Middle East region will calm down quickly so that businesses can operate normally. While waiting for this event, we remain cautious on investments in stocks. Valuations are reaching attractive levels in certain pockets and it can certainly be said that as the geopolitical event stabilizes, we can see a good return opportunity for Indian equity markets.
Q) The IT sector seems to be the most affected thanks to the comments on AI, but with geopolitical tensions rising, other sectors have also started to feel the rub-off effects. Are there any sectors now available at attractive levels?
A) Banks as a sector look attractive from a risk and return perspective. Outside of the banking sector, we believe the market will likely favor a bottom-up approach to stock selection given the growing divergence between actual results and expectations and valuations. We do not recommend sector/thematic investing in the immediate 12-24 months.
Q) What could be the good, bad and ugly sides of Indian markets in the near term?
A) We are very optimistic about India’s medium to long term prospects as valuations have normalized and earnings prospects are improving. However, the current conflict in Iran can certainly delay earnings recovery. In summary, cautious in the short term, positive in the long term.
Q) REITs have been net sellers in 2025, and the story continues in 2026, perhaps for a different reason now. The situation seems to be changing when it comes to the FDI route, as India opens channels for Chinese investments to land in several sectors. What is your point of view?
A) Gross FDI for India for FY26 reached a record high. PE disinvestment in the last 12 months, which was factored into FDI, led to a decline in the figure.
We believe FDI will likely continue to increase in India. REIT flows are a function of relative comparisons on earnings growth and valuations. Indian corporate profits in FY25 and FY26 were slowing down and valuations on a relative basis were higher, which made sense for FPIs to look at other markets.
We believe India has a good chance of attracting flows again as earnings growth is expected to accelerate and valuations on a relative basis have also moderated somewhat. The only caution concerns the current conflict in Iran, which may delay the entire process.
Q) The rupee seems to be hitting new lows every week – where do you see the currency heading and what impact will it have on the Indian markets/economy?
A) We must not normalize the current geopolitical crises in the Middle East, which are putting pressure on India’s trade deficit in the short term, leading to some pressure on the currency.
In the medium to long term, we have always been disciplined on fiscal deficit, debt to GDP for general government, inflation is currently stable below the RBI range, stable until foreign exchange reserves increase with some diversification into gold, stable until balance of payments improves. All these factors lead us to believe that the rupee should perform well given the fundamentals of the economy.
Q) Will crude oil at $100/barrel and above harm Indian markets and macro-economies? We have launched an investment narrative to the world about our macroeconomic stability, which could be challenged in the near future. What is your point of view?
A) The price of crude oil at $100 is true for all companies in the world. In the past, India’s fiscal position and balance of payments were significantly dependent on crude prices. Over the years, we have made progress in reducing this dependence, particularly due to the strong recovery in service exports. We do not see a major impact on business if one takes a pessimistic view of crude remaining at $100 for a longer period.
Q) How should investors recalibrate their portfolio amid increased volatility? Are there any themes/asset classes they should overweight or underweight? (Assuming the person is between 30 and 40 years old)
A) With valuations normalizing (even if they are not yet very cheap), we believe that earnings growth should be reflected in returns over time. Bloomberg consensus expects >14% CAGR for Nifty/Sensex earnings growth over the next few years. We are constructive on the market going forward and hence would advise continuation of SIP in diversified categories like Flexicap/Large & Mid Cap/Multicap/Focused, Business Cycle etc.
Q) Do you advise investors on things to avoid doing in the current environment? We have already seen a decline in SIP flows of over 3% on a MoM basis.
A) We believe in maintaining a long-term horizon when investing in stocks, having a balanced asset allocation, seeking good advice from experts and finally having rational expectations regarding long-term returns.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
