Market experts are advocating for gradual equity exposure increases as recent corrections have brought valuations to attractive levels. According to DSP's latest report, Indian equity markets declined more than 11% in March due to the prolonged US-Iran conflict and rising oil prices, but this correction is creating favorable conditions for investors. The report notes that Nifty's price-to-earnings ratio has fallen below 20x and is nearing its historical average, positioning the market between fair and average valuation zones. DSP stated that they are dropping their conservative stance on equities, with several market indicators aligning in favor of equities including oversold technical readings, elevated volatility levels, and weak market breadth typically seen during panic selling phases.
Market experts are advocating for a phased approach to capital deployment as geopolitical tensions appear to be stabilizing. According to The Economic Times, Deepak Shenoy from Capitalmind MF was sitting at roughly 65% equity deployment in March — near the minimum permitted for a flexicap fund. Shenoy emphasized that the strategy is a deliberate hedge against volatility, noting that the point is not to time the bottom but let the market start to tell you when there is some kind of recovery. Independent market expert Daljeet Kohli suggests starting with 15-20% deployment now and adding in small tranches during negative news cycles, emphasizing that this is the right time to begin using money gradually. DSP's report adds that a disciplined approach is key during such phases, as falling markets allow investors to accumulate more units at better prices.
Market experts are watching power, AI-linked sectors, and metals closely for long-term growth opportunities. According to The Economic Times, Kohli identified power as a clear beneficiary of the current episode, with a long value chain spanning renewables, generation, transmission, equipment players, and financers. Within the BFSI space, power lenders like PFC and REC are showing attractive valuations amid potential merger activity, with both companies available at reasonable valuations considering they are largely backed by state and central government guarantees. IT commentary has been similarly uninspiring, leading to a more selective approach in these sectors. DSP's report emphasizes that valuations across key sectors such as banks, IT, healthcare, and parts of FMCG are now at or below long-term averages, strengthening the case for increasing exposure.
Experts indicate that early signs suggest the market is starting to recover, though they caution that full recovery is not yet evident. As reported by The Economic Times, Shenoy indicated that while uncertainty persists, the worst of recent geopolitical tensions may already be behind us. Kohli believes that probably the worst-case scenario has been understood by both parties, with negotiations now focused on future course. However, he cautioned that resolutions typically take time, with ego hassles and various issues requiring sorting out. The real economic impact of the conflict will unfold over the next two to three quarters, with companies' specific reactions emerging in Q2 and Q3 numbers. DSP's report notes that the gap between bond yields and earnings yields has narrowed to around 1%, which they describe as an attractive zone for owning equities, historically seen during periods of heightened pessimism.
Experts emphasize that deployment makes sense, but patience with data matters more than chasing price moves. According to The Economic Times, Shenoy's message to investors is clear — deployment makes sense, but patience with data matters more than chasing price moves. The results will do the talking, as funds focus on opportunities across all market caps based on fundamental analysis rather than category-specific strategies. PL Capital's latest report provides additional context, noting that the Nifty has fallen by 6.6% over the last three months due to continued foreign institutional investor redemptions against the backdrop of geopolitical instability. The Indian stock market ended with strong gains on April 21, with the Sensex climbing 753 points (0.96%) to 79,273.33 and Nifty 50 gaining 212 points (0.87%) to 24,576.60, as investors increased risk appetite following optimism about US-Iran peace talks.
