In an increased global context volatility Triggered by geopolitical tensions in the Middle East and a sharp rise in crude oil prices, stocks markets around the world have experienced sharp fluctuations in recent weeks.
Although the uncertain macroeconomic environment has kept investors on the sidelines, sectoral corrections have also opened up selective opportunities. In an interaction with ETMarkets Smart Talk, Devang MehtaDeputy Managing Director and CIO – Equity NDPMS at Spark Capital Private Wealth, said domestically focused sectors such as powerinfrastructure and automotive are starting to look attractive after the recent market correction.He also advised investors to remain disciplined, continue with their SIPs and focus on long-term investments rather than reacting to short-term volatility. Edited extracts –
Q) Thanks for taking the time. The month of March has been a roller coaster ride for the stock markets, not just in India but across the world. How do you see the markets – more difficulties ahead?
A) In March 2026, stock markets indeed experienced extreme volatility, mainly due to the escalation of the US-Israeli war against Iran and the subsequent closure of the Strait of Hormuz.
This conflict triggered a “risk aversion” environment, characterized by sharp declines in global indices and a surge in crude oil prices beyond $100 to $110 per barrel as well as foreign capital outflows.
The conflict has disrupted about 20% of global oil supplies passing through the Strait of Hormuz, raising fears that oil could be on the boil. If the war continues, the collateral and economic damage could worsen the suffering.
Although it is virtually impossible to gauge the intensity and duration of the war, long-term investors must adapt to volatility and uncertainty.
The Indian market is now undergoing price correction, valuation correction and time correction for 19 months and the data generally shows that after underperformance and with the positive return of the earnings cycle, one should stay focused and not panic.
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. Any sector(s) now available at an attractive level
A) IT has particularly been a hugely underperforming sector and it has its own reasons. But as markets stabilized in February, showing a decent budget, a good earnings season and some clarity on US tariffs, unfortunately, news related to Iran’s war with the US and Israel gained prominence and had its impact on global markets and our own markets.
With all the news and India’s sensitivity to dependence on oil and gas, most of our sectors and companies in the indices and even the broader markets have undergone a severe correction.
Sectors that are domestically focused and have little global exposure should ideally be pursued in the first phase.
Capex-driven sectors like power, HVDC, engineering, capital goods, infrastructure and even consumer discretionary related sectors like automobile and auto components have seen significant corrections.
Some accumulation here would be a good start to building new portfolios. Niche pharmaceuticals and wellness, including hospital and a few BFSI-related companies, are also eligible for long-term investment.
Q) What could be the good, bad and ugly sides of Indian markets in the near term?
A) Good – After a sluggish 2025, India Inc. is expected to see its earnings rebound by around 15% year-on-year in FY26-27.
With India’s valuation premium shrinking compared to other emerging markets, expectations are high for a return of foreign capital in 2026.
Strong SIP-driven capital inflows and retail participation continue to protect the market against volatility from foreign investors.
Headline CPI inflation stood at 2.75% in January 2026, although a new series makes historical comparison difficult.
Recent pro-growth measures, including reductions in income tax and GST rates and interest rate reductions (cut by 125 basis points to 5.25% in early 2026), are aimed at boosting consumption.
Bad – The Indian rupee recently fell to an all-time low, crossing ₹92.35 against the US dollar, which threatens to increase “imported inflation”. Pending trade deals with the United States are also a problem. Foreign institutional investors have been aggressive net sellers, dumping over ₹32,800 crore in the first week of March 2026 alone.
The Ugly – A major escalation in the Middle East, such as a closure of the Strait of Hormuz, could push oil prices to unsustainable levels, causing a serious and sudden shock to the Indian economy. If global uncertainty leads to record selling by foreign institutional investors, stock market multiples could face intense downward pressure.
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) REITs have been massive net sellers in India in 2025, driven by concerns over high valuations, concerns over US tariffs, and a “Sell India, Buy China” trend. Record capital outflows in 2025 have been driven by risk-averse sentiment due to high Indian valuations relative to peers, weak corporate profits and global macroeconomic headwinds like rising US bond yields.
At the start of 2026, REITs remain cautious. While they briefly became net buyers in February 2026 following a US-India trade deal, this trend reversed in March due to escalating conflicts in the Middle East and a weakening rupee.
India has started relaxing FDI norms for neighboring countries, including granting a fast-track project approval process within 60 days, to attract manufacturing investments. This represents a change from 2020 restrictions, allowing Chinese capital to enter critical sectors.
This policy shift aims to bridge the investment gap and boost local manufacturing, even as India manages a huge trade deficit with China. It highlights a strategic approach aimed at reconciling security concerns with the needs of economic growth.
The most striking change is the relaxation of Press Note 3 (2020), which had virtually frozen Chinese investments since the Galwan clash. The story is shifting from a general stance of “avoid China” to a calibrated strategic engagement.
Stock markets have already started to price this in, with stocks of electronic manufacturing services (EMS) and renewable energy surging on the news.
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) The Indian Rupee (INR) has indeed reached a new record low against the US Dollar (USD), moving beyond the 92 level and reaching around 92.35-92.37. This weakness is due to the combination of strong geopolitical tensions, rising crude oil prices and significant foreign capital outflows.
The rupee is expected to trade in a wide range of 90-93 as long as geopolitical tensions in the Middle East persist and oil prices remain high.
As a major importer of crude oil, electronics and machinery, a weaker rupee makes these inputs significantly more expensive. This directly fuels domestic inflation, increasing the costs of gasoline, diesel and electronics.
The cost of imports of goods exceeds the growth of exports, widening the current account deficit (CAD). Indian companies with large unhedged foreign currency loans are facing higher repayment charges, squeezing their margins.
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) Crude oil prices sustained above $100 per barrel pose significant risks to India’s macroeconomic stability by widening the current account deficit (CAD), increasing inflation (by 35-40 basis points), and potentially reducing FY27 GDP growth to around 6%.
While this challenges the investment narrative on macroeconomic stability and threatens pressure on stock markets, strong foreign exchange reserves (around $720 billion) and the possibility of a shorter-lived shock could mitigate the long-term damage.
With $720 billion in foreign exchange reserves and falling global demand, this shock could be acute rather than prolonged, preventing a structural breakdown.
While a short-term spike causes volatility, a sustained long-term trend above $100 requires rebalancing portfolios toward defensives. The “macro stability” argument is challenged, but not entirely broken, unless the conflict causing the price rise persists over a long period of time.
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) For investors aged 30 to 40, high volatility is an opportunity to accumulate shares cheaply rather than a reason to panic. In the long term, the goal is to maintain a high-growth, yet resilient portfolio that can withstand short-term shocks.
Pursue all systematic investment plans (SIPs). Volatility allows SIPs to purchase a greater number of units at lower cost, leading to greater wealth creation in the long term.
Asset allocation based on risk profile, liquidity needs and life goals are the most critical factors. You don’t lose when the markets panic, you lose when you panic.
Q) Your advice to investors on choices What should we avoid doing in the current environment? We have already seen a decline in SIP flows of over 3% on a MoM basis.
A) Monthly inflows reached ₹29,845 crore, down 4% from January’s ₹31,002 crore, ending a two-month streak above ₹30,000 crore. The moderation is linked to the shortest month, with some end-of-month SIPs being shifted to the beginning of March.
Market corrections often trigger fear, leading to panic selling, which turns paper losses into permanent losses. During all market declines, investors who stayed invested recouped their losses, while those who panicked and sold missed the ensuing rally and saw a significant, realized decline in their portfolio.
Waiting for a “low point” to invest generally leads to missing out on the best market days. Missing the 10 best trading days in a decade can cut your long-term returns in half. Historically, in Nifty, you could have lost 82% of your wealth by staying away for just 2% of trading days.
Trying to time the market is a losing strategy because no one can consistently predict the ups and downs. Think in terms of years, not months. Volatility is temporary; long-term growth is the goal.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
