Like on a global scale crude oil price and geopolitical tensions in West Asia show signs of easing, market participants are recalibrating their portfolio strategy in India with a renewed focus on financial services, automobiles and long-term structural themes such as defense, powerand digital infrastructure.
In an interaction with market expert ET Now Nitin Raheja of Julius Baer Wealth Advisors presented a cautiously optimistic outlook, emphasizing that although in the short term volatility persists, the medium-term situation for India actions improves significantly.
NBFCs remain in play, but private banks take priority
On the financial sector, Raheja has maintained a selective but constructive stance, particularly within NBFCs, while clearly favoring private banks.
“We like NBFCs as part of a broader basket of financial services, where our preference in the current circumstances is clearly towards private banks, especially given how the valuations are stacking up and also how they have been sold over the last six months to a year. But NBFCs are a basket that we like. In this one, we either like some of the larger NBFCs which have a fairly broad diversified product basket, or we like the focused NBFCs with a critical size.
He added that macroeconomic inflation and interest rate expectations remain key variables for the sector.
“Looking at the way inflation was rising, there was an expectation that interest rates would have risen around the second half of this year, which is not good news for NBFCs who are immediately seeing their cost of funding rise. In this context, the larger NBFCs have managed better. But now that we are reaching a settlement on the crisis in West Asia, hopefully with the drop in oil we see inflation also starting to come down and the rise in rate is carried over, in which case the NBFC story somehow continues to do well as it has over the last 6-12 months.
Automobiles: selective force, EVs appear as a structural driver
Automotive continues to remain a stock-picking market, with additional tailwinds from the accelerating transition to electric vehicles.
“Automotive is a story that was doing well selectively and will continue to do well selectively. Depending on the rollout of models for different companies, you should see autos doing well. Of course, the other thing that this crisis has clearly highlighted is the importance of electric vehicles in your portfolio, and so companies that have a strong basket of electric vehicles would do well as well. So we remain positive on automotive as well as the ancillary package would benefit.”
Macroeconomic change: inflation relief, but structural themes intact
Discussing the broader macroeconomic impact of a possible resolution in West Asia, Raheja highlighted a shift in inflation and supply chain dynamics, while emphasizing that deeper structural themes remain unchanged.
“If we look at January, there was a lot of optimism… The GST cuts were boosting consumer demand. What happened after that was the whole war with West Asia, and that interrupted that positive sentiment. Now with a resolution on the West Asia front, you’ll obviously see oil prices come down. So one facet of inflation would come into play from a positive perspective as well as the whole chain disruption supply.”
He added that several long-term themes are now gaining visibility:
“Strategic autonomy is one of the big themes globally today. When we talk about strategic autonomy on the manufacturing side, we’re talking about the whole manufacturing sector coming back, defense coming back to the forefront… With inflation falling, premiumization of consumption will become another big theme. This would also mean the return of consumer services like hospitality and travel.”
He also highlighted that BFSI valuations were attractive, with potential foreign capital inflows acting as a trigger.
“Even the slightest sign of foreigners returning and joining this sector should allow this sector to do well. »
Ethanol push opens up long-term opportunities
On the government’s move toward higher ethanol blending, Raheja acknowledged the structural opportunity but cautioned on the timelines.
“This space should look interesting. However, one needs to be a little aware that from a sugar perspective, if one sees too much diversion, sugar is a very sensitive topic for most households. Although the government has allowed up to 100% blending, the entire ecosystem needs to be adapted for this. It will take time, but it surely opens up alternative sources of revenue for companies in this sector.”
Datacenters, energy and defense: multi-decade structural challenges
Among the long-term themes, Raheja highlighted data centers and the broader energy ecosystem as one of the most powerful structural stories.
“The whole move to give a tax holiday for almost 21 years…there’s a discussion about almost $100 billion of investment in data centers. That’s going to boost energy and the whole ecosystem around energy, including renewables. That continues to remain a theme, although it’s seen a lot of acceleration.”
He added that short-term consolidation is possible, but the long-term direction remains intact.
“We might see stock prices start to calm down in the short term, but this is a multi-decade theme, there’s no doubt about it.”
Hospitality: strong demand still intact
As for hospitality, Raheja remains optimistic about the long-term demand outlook, driven by structural tourism and capacity constraints.
“Hospitality for me is once again a multi-year theme. During your vacation, if you go to one of our well-established mountain resorts, there is not enough room anywhere. The number of hotels created, especially in the four and five star categories, is not enough to meet the demand.”
He also noted a change in business models:
“Most players in this segment are now adopting growth models based on less capital. So a big change has happened in the last few years, and I think this growth will continue for a while.”
Outlook: focus on recovery in the second half
Overall, Raheja’s message indicates that the market is moving from macroeconomic stress to selective opportunity, with earnings and liquidity in the second half likely to shape the next leg of the rally.
While near-term caution remains warranted, the combination of falling crude oil prices, stabilizing inflation and domestic structural themes continues to support a constructive medium-term outlook for Indian equities.
