According to Alpha AMC CEO Rajesh Singla, the Indian stock market has completed significant heavy lifting and valuations in mid and small-cap segments are no longer cheap. As reported by Mint, Singla expects selective performance driven by earnings visibility rather than broad-based rallies. The market structure suggests returns will come from identifying right opportunities early rather than riding the index, with consolidation more likely without crowding out profitable companies. Pankaj Murarka from PMS Investor echoes this sentiment, emphasizing that "the game now is stock selection, not sector selection" and that "strong management teams can deliver growth even in challenging environments." He notes that there are still opportunities in mid and small caps, especially after the recent correction, but investors need to be selective with stocks that deliver positive surprises seeing strong market reactions.
The immediate impact of the US-Iran conflict is primarily through crude oil, as India imports more than 80% of its oil needs. According to Singla's analysis reported by Mint, sustained oil price rises will affect inflation, currency, and corporate profit margins. However, if the situation remains cyclical rather than structural, India's domestic growth in consumption, capital expenditure, and financing should continue driving the economy. Murarka confirms that "markets have absorbed the macroeconomic shock" from the oil price spike witnessed in March, though earnings recovery may be pushed back to the second half of the year. He believes the underlying growth in India remains fairly resilient, with "markets poised for a new high on the index by the end of this year."
The defence sector maintains structural strength due to increased government spending, emphasis on indigenisation, and export opportunities. As reported by Mint, Singla acknowledges that while the easy money has been made, the sector continues as a long-term story. However, he emphasises that investors need to be selective at current valuations, with returns now depending on execution and earnings delivery rather than just positive narratives. Murarka highlights that "the spike in energy prices has exposed India's energy vulnerability, so we will likely see higher investments in the energy ecosystem, which should do well." He also points to "higher investments in the energy ecosystem" as a new sector opening up, indicating potential for defence sector expansion in related areas.
The IT sector is experiencing fundamental changes driven by AI, with Murarka describing it as a shift rather than a slowdown. According to Mint reports, he recommends approaching the sector as company-specific bets rather than sector calls. Key focus areas include firms investing in AI capabilities, companies with strong deal pipelines, and players moving up the value chain. The sector transformation is creating new opportunities in data, cloud, and digital transformation while reducing demand for traditional services. Murarka notes that "the sector has not done well in the last 12 months, but valuations are at cyclical lows, levels we last saw around 2018." He believes the concern about companies shrinking over the next 5-10 years has been addressed, with these companies going through a transition where new opportunities are opening up, making them growth companies in the near, medium, and long term.
Q4 earnings are expected to show steady performance but with uneven sectoral results. As reported by Mint, sectors sensitive to crude oil like aviation, paints, logistics, and parts of FMCG may face margin pressure if oil prices remain elevated. However, banking, capital goods, and select manufacturing segments are likely to continue showing resilience. Murarka expects "growth may remain moderate over the next four to six quarters due to this transition, but once this phase passes, they will return to a high-growth trajectory." He notes that "historically, major technology transitions have led to stronger growth for IT services companies, and I see no reason why this time should be different." For long-term investors, he recommends a "three- to five-year view, with potential for strong returns" as growth will improve over the next four quarters, with the market currently pricing in muted growth.
