According to Nippon India Mutual Fund's CIO Sailesh Raj Bhan, India's economy is structurally more resilient than in previous cycles, with the current market weakness representing an accumulation opportunity for long-term investors. As reported by Mint, Bhan noted that 'India today is also far less fragile than before,' while the broader belief is that elevated crude prices are not a permanent situation as they would hurt the global economy as well. The CIO emphasized that 'apart from some currency depreciation, the Indian economy has held up reasonably well, and growth numbers remain stable.' Bhan added that 'once conditions normalize, flows are likely to return to India,' with the outlook potentially improving further if crude prices ease over the next 6-12 months, otherwise investors may have to wait another year.
Bhan advocates for continued systematic investment plan (SIP) accumulation during current market conditions, stating that 'things will improve in India as investors begin to see opportunities emerge' and traditional businesses are doing well as they come off a weak earnings cycle. According to the CIO's analysis, 'currency movements could provide a meaningful boost—earnings could expand by around 10% if current levels sustain for 12 months.' Among preferred sectors, Bhan likes all private-sector banks, consumer plays, and general insurance plays, with the insurance focus being on domestic-focused general insurance space rather than power, cables, and wires sectors. The CIO emphasized that 'for now, this remains an accumulation market' and investors should continue SIPs and, if comfortable, even increase allocations during periods of weakness to accumulate more over the long term.
Regarding valuation concerns, Bhan noted that 'you still have to be careful about valuations and mispricing because many stocks continue to price in very high expectations' - though this froth has decreased from 70-80% of stocks to around 30-40% of the market, especially in small caps. As reported by Mint, the biggest macro risk that investors are probably underestimating is oil, with Bhan stating that 'oil remains the key macro risk for India, and markets may still be underestimating its impact if prices stay elevated for a prolonged period.' The CIO explained that 'the longer crude remains high, the bigger the challenge becomes for the trade balance, current account, inflation, and currency stability,' though some of this risk is already getting priced in after nearly two years of flat-to-negative returns in parts of the market.
According to the analysis, FIIs have sold in nearly 80% of Nifty 50 stocks versus around 50% in the Nifty 500, with selling concentrated more in large caps due to better liquidity. Bhan explained that 'FIIs usually sell more in large caps during corrections because that's where liquidity is highest' and it's much easier to sell Nifty 50 or top-100 names than small and mid caps. The CIO noted that 'when forced selling occurs across broader markets, small and mid caps can see much sharper price corrections' due to limited liquidity in smaller stocks. Bhan added that 'every market comes with its own operating challenges, and these issues in India have existed for years' - investors always weigh trade-offs despite concerns around disclosures or liquidity, with the key question being whether India still offers the right opportunity at the right price.
