Global equity markets have experienced heightened volatility over the past four months, with weekends often bringing fresh statements and counter-statements related to the US-Iran conflict, according to The Economic Times analysis. The developments have frequently influenced market sentiment at the start of the following trading week. Crude oil price movements remain a key indicator of how markets assess geopolitical developments, with the absence of a sharp spike in oil prices indicating that market participants are assigning limited significance to such statements. The first-quarter earnings season for FY27 has commenced, shifting investor focus to corporate performance, with companies reporting results below market expectations likely to witness stock-specific reactions. Given the current market conditions, it would be wise to be selective not only in terms of stocks but also in terms of sectors, as any sector dependent on crude oil will be stressed in Q1 FY27.
The ET analysis highlighted five Refinitiv-screened stocks with improving scores, favourable analyst ratings and upside potential over 12 months. The selection criteria included stocks with favourable analyst sentiment by including only those carrying an average recommendation of 'Strong Buy,' 'Buy,' or 'Hold,' while also indicating potential upside over the next 12 months. These stocks had previously undergone a correction and have recently shown signs of recovery alongside the broader market. According to ET, investors with fresh capital may prefer to wait for greater clarity before evaluating companies undergoing structural business transformations that could have a longer-term impact on earnings.
Jio Financial Services leads the recommendations with a 'Strong Buy' rating and 26% upside potential. Hikal Ltd follows with a 'Strong Buy' recommendation and 19% upside potential. Northern ARC Capital is rated 'Buy' with 18% upside potential. Petronet LNG carries a 'Hold' rating with 13% upside potential, while Lenskart Solutions rounds out the list with a 'Buy' recommendation and 10% upside potential. These recommendations span sectors including NBFCs, utilities and others, with the stocks having previously undergone corrections and showing recent recovery signs. However, investors should note that there might also be trouble for sectors where China is playing spoilsport by dumping, and this trouble might continue for longer.
Market participants with a bullish outlook are being reminded that the mid-cap segment has witnessed a sharp correction over the past 18 months, with such corrections occurring periodically. According to ET, the base-case expectation is for markets to trade with a bullish bias in the near term, but the current environment calls for a selective investment approach rather than broad-based buying. This approach is particularly relevant in the mid- and small-cap segments, where stock performance can vary significantly. ET identifies five companies with upside potential of up to 26% that are more suited to investors with an investment horizon of at least two years rather than short-term investors. These businesses are driven by demand that is relatively less dependent on market sentiment or economic cycles, with three companies operating in the healthcare sector, one in home finance, and another in building materials.
For identifying the five mid- and small-cap stocks, ET applied multiple financial filters including a minimum return on equity (RoE) of 15%, a net profit margin of at least 10%, review of dividend payment history, and assessment of promoter shareholding trends. The report notes that a significant reduction in promoter stake could be viewed as a potential red flag. All five companies have an average Stock Report Plus score of at least 7, with ET cautioning that even fundamentally strong stocks may underperform during periods of broader market weakness. Investors should consider metrics such as return on capital employed (RoCE), debt levels, and dividend payment history, as these factors can provide insights into a company's profitability, capital efficiency, financial strength and management's ability to navigate business cycles.
