According to Business Standard, Nilesh Shah, managing director at Kotak Mahindra AMC, stated that crude oil prices will be the primary driver of equity markets in the near term. The oil market is signalling that supplies could get constrained again, which may lead to another increase in prices. Shah emphasized that it's not just about oil prices, but also about supply disruptions, particularly regarding the Strait of Hormuz. The market's reaction to supply constraint possibilities influences both oil market and equity sentiment.
As reported by Business Standard, Shah noted that markets are experiencing natural back-and-forth movements due to geopolitical developments. He warned that return expectations need to be moderated amid recent geopolitical tensions. The expert expects volatility to persist and anticipates returns to be in the high single-digit to low double-digit range for the remainder of 2026. Shah advised investors to maintain a neutral allocation while investing with moderate return expectations.
According to Business Standard, Shah expects Q1FY27 earnings to reflect the full impact of the West Asia conflict. He believes that overall corporate earnings growth could fall to low single digits or even turn negative due to oil marketing companies likely reporting losses. Even excluding oil marketing companies, the supply chain impact extends to petrochemicals, petroleum products, polymers, and chemicals. For large-cap companies, earnings growth is expected in the low single-digits, while small- and mid-cap companies may see low double-digit growth.
As reported by Business Standard, Shah identified a delay in corporate earnings recovery due to multiple one-off factors affecting four consecutive quarters. Companies previously dealt with labour code changes in Q3, followed by the West Asia conflict impacting Q4 and Q1FY27. The September quarter could be influenced by monsoon conditions. Shah noted that four consecutive quarters being affected by different one-off factors has delayed the recovery timeline that was earlier expected to begin in Q2.
According to Business Standard, Shah advised against a cash-focused approach, stating that valuations are reasonable and not excessively expensive. He recommended a staggered investment approach due to expected volatility. Shah emphasized that this is a time to maintain a neutral allocation while investing with moderate return expectations, rather than deploying all capital at once. The expert noted that market reactions have become more measured as investors recognize that President Trump's statements don't always translate into action.
