Indian equities staged a dramatic turnaround in late trade after optimism surrounding a potential US-Iran peace understanding lifted investor sentiment globally, reinforcing hopes that easing crude oil prices could provide relief to several domestic sectors already under pressure from inflation concerns. According to market expert Neeraj Dewan, Wednesday's trading session was characterized as 'a seesaw kind of a day' with markets swinging sharply before recovering strongly on positive geopolitical headlines. As reported by The Economic Times, Dewan noted that the near-term direction of the market remains closely tied to developments around the US-Iran situation, especially because traders had built cautious positions in sectors sensitive to crude oil prices. Speaking to ET Now, Dewan described the day's volatility, stating 'Yesterday definitely was a seesaw kind of a day. You saw market doing well, then it gave up all the gains and then the news flow came in'. He emphasized that 'in the shorter term definitely this US-Iran deal is going to be very important for our market because lot of positioning has been done in the market'.
Dewan highlighted that concerns over inflation and elevated crude prices had weighed on sectors such as banking, automobiles, auto ancillaries and real estate in recent weeks. Any meaningful correction in oil prices following a diplomatic breakthrough could trigger aggressive short covering in these segments. According to his analysis, if the US-Iran deal materializes, there can be 'some short covering in those sectors which can take the market up from these levels'. The market has remained range-bound around the 24,000 mark despite intermittent rallies, but Dewan believes easing geopolitical tensions could provide the momentum needed for a stronger breakout. As he observed, 'We have been very close to 24,000. We have had 200-300 points above that, below that, we have been languishing there only'. He noted that 'Besides that, the earning season so far has not been that bad. There has been a quite decent earning season. Midcap, smallcaps have also started contributing'.
While global developments remain critical in the near term, Dewan believes domestic fundamentals are steadily improving. He pointed out that the ongoing earnings season has largely surprised positively, especially within the broader market. He highlighted encouraging performances from FMCG companies, citing Nestle India as an example of resilient earnings momentum. Dewan expects economic activity linked to domestic themes to gain further traction after election results, benefiting sectors such as infrastructure, railways, defence, water and real estate. He maintains a 'pretty constructive' outlook for the market, believing that broader rally can play out in the medium to long term. As he stated, 'My outlook for the market will be pretty constructive. If the deal is happening, in the shorter term that will matter, but on the medium to long term also we are well placed where a broader rally can play out in the markets'.
After a nearly 10% rise at the benchmark level and an even sharper rally in mid- and small-cap stocks, Dewan remains firmly bullish on the mid- and small-cap universe. According to his analysis, 'it will be more into mid and smallcap space where still there is valuation gap'. Despite the recent rebound from March lows, he believes many investors are yet to recover losses incurred during the sharp correction seen between September and October 2024. He cautioned that the market is increasingly becoming 'stock-specific rather than sector-specific' from current levels, emphasizing the need for selective stock picking rather than broad sector exposure. As he noted, 'Still people have not made that kind of return, they are still in losses as far as the broader portfolios are concerned'. However, he believes 'there is lot of value in the broader market still even after the runup we have seen recently'.
On the information technology sector, Dewan noted that the broader mood has not materially improved despite sharp corrections in several names, with 'the outlook given by some of the top companies has not been that great for the next year'. However, he believes select opportunities exist, citing relatively stable commentary from TCS and strong performances from companies like Oracle Financial Services Software. In the defence sector, Dewan highlighted Mazagon Dock Shipbuilders and BEML as preferred names, acknowledging that valuations are no longer cheap but believing long-term investors can still generate healthy returns. He noted that 'Mazagon is one company where I feel they have a good order book, execution has been good so far'. The real estate sector has seen a strong comeback in recent weeks, with Dewan attributing the rally to value buying after steep corrections in frontline property stocks, particularly companies like DLF. He singled out Shriram Finance for delivering robust earnings despite macro headwinds, advising investors to 'stay with the solid bigger NBFCs, they have the potential to go through these small variations which may happen in the shorter term'.
