According to ETMarkets reports, Ritesh Taksali, an expert in market analysis, highlighted that while the Nifty 50 is currently trading at around 20x trailing earnings, this valuation appears attractive from a historical perspective. The expert noted that following recent corrections, valuations have become more reasonable despite ongoing market volatility. However, as reported by ETMarkets, Taksali cautioned that risks persist, particularly around oil prices, inflationary pressures, and potential geopolitical shocks, which could continue to create volatility in markets. Recent developments show that India's valuation premium over other emerging markets has moderated significantly—from a peak of over +2 standard deviations above its 20-year average in FY23 to levels now closer to its long-term mean, as reported by Moneycontrol.
As reported by ETMarkets, Taksali explained that elevated volatility has been witnessed for over a year, beginning with trade-related concerns and later exacerbated by the West Asia conflict. The expert emphasized that markets have largely been reacting to global developments rather than domestic macro fundamentals, and this trend is expected to persist into FY27. According to Moneycontrol, the impact of the West Asia crisis on India should not be underestimated, as about 70 percent of India's oil imports and nearly 90 percent of its LPG imports (which account for ~60 percent of total LPG consumption) pass through the Strait of Hormuz, making the economy highly exposed to disruptions. Every $10 per barrel rise in crude oil prices widens the current account deficit by around US$18 billion (around 0.41 percent of GDP) and adds around 50 basis points to CPI inflation. While inflation remains relatively low at 3.21 percent in February (up from 2.74 percent in January), providing some cushion, risks of imported inflation persist due to rising geopolitical tensions.
According to ETMarkets, Vinod Karki, Equity Strategist at ICICI Securities, argues that the Nifty index offers a safe haven during the current geopolitical tensions due to its unique composition favoring energy producers over consumers. As reported by ETMarkets, India's energy mix comprises roughly 55% coal and electricity, with the remaining 45% from oil and gas, and companies like Coal India, NTPC, Power Grid, and ONGC—which are either upstream energy producers or electricity suppliers—sit inside the Nifty and stand to benefit from higher energy prices. The expert noted that the market has already priced in the base case scenario, with total market cap erosion of close to ₹51 trillion (roughly 15% of GDP) from the day the Middle East conflict began to the bottom of the market at end-March. Karki believes this correction largely reflects the base case scenario of a three to four month disruption rather than a prolonged structural crisis, with both fundamental and valuation support appearing at recent lows.
According to ETMarkets reports, Taksali stressed the importance of diversification across Indian equities, fixed income, precious metals, and international equities with a time horizon of at least five years. The expert noted that all major asset classes have experienced corrections over the past two months, creating a compelling case for gradual exposure diversification. As reported by Moneycontrol, given the current uncertainty, the risk of further downgrades still remain, and any recovery in earnings is likely to be gradual rather than sharp, depending on stability in commodity prices, supply chains, and the broader macro environment. The expert highlighted that the importance of diversification cannot be overstated, especially considering the past two years of market experiences where international equities and precious metals emerged as strong performers. Karki specifically recommends focusing on largecaps for better risk-reward over small and midcaps, as the SMID space has not corrected as sharply as history would suggest, partly due to robust domestic mutual fund flows from SIPs.
As reported by ETMarkets, Taksali indicated that defensive sectors are likely to remain a safe-haven for investors if the war persists over a longer period. However, any quick resolution could create an opportunity to increase exposure to cyclical sectors such as financials, infrastructure, and consumer discretionary, which have been impacted by recent volatility. According to Moneycontrol, yes, we are bullish in the defence sector, as policy support through the Defence Acquisition Council (DAC) has accelerated capital acquisition proposals with a strong focus on domestic manufacturing, reflecting a strategic response to global uncertainty. The push for indigenisation reduces external dependency amid vulnerable global supply chains, strengthening long-term strategic autonomy. Meanwhile, we currently have zero exposure to the IT services sector, as the company doesn't see broad-based momentum in this sector, instead preferring to stay selectively invested in companies with stronger growth and better positioning in the evolving AI landscape.
According to ETMarkets reports, Taksali observed that India's valuation premium relative to emerging markets has moderated significantly—from a peak of over +2 standard deviations above its 20-year average in FY23 to levels now closer to its long-term mean. The expert noted that India is currently trading at a discount to US equities, at around -1 standard deviation relative to its 20-year average. As reported by Moneycontrol, from a global perspective, India appears less attractive to global investors due to the lack of pure AI-driven plays and the country's positioning as a dividend and buyback way of creating value in IT companies. Additionally, foreign investors are facing losses from both market indices declining and rupee depreciation, as well as higher transaction costs following the recent STT hike, which could further dampen near-term inflows. Even with the easing of US–Iran tensions, the aforementioned factors suggest that any shift in global investor stance is likely to be gradual.
