Markets are showing continued cautious optimism as they recover from recent lows, with Nifty 50 recovering to 24,300 levels after slipping to 22,300 levels during the current volatility. According to The Economic Times, Trideep Bhattacharya from Edelweiss AMC suggests that the worst phase of uncertainty may already be behind us. "In my opinion, in most logical circumstances we have probably seen the worst of the war in the sense of worst of the uncertainty. While the exact deal, the nature of it is still pending and will take time to evolve over time, we have seen the worst of it and that is our base case," Bhattacharya stated. He emphasized that the base case points toward a gradual normalization by the end of April, with markets expected to return to normalcy once investors realize the worst point of the event is over. As reported by The Economic Times, "The base case is that by the end of April most of war-related uncertainty is resolved and we gradually live back to normalcy because some of the energy infrastructure will take a bit of time to normalise but the market will discount once it knows that the worst point of the event is over."
Despite the recovery, experts remain cautious about potential triggers that could derail the optimism. As reported by The Economic Times, Bhattacharya warned that risks remain if key developments fail to materialize. "The reason why it is vacillating around the higher level of the mark that you are talking about is we do not seem to find yet a common ground of understanding between the warring parties and that is necessary, by the way, before we end April. If it does not happen… the way to keep track of this is if oil price stays above $100 for a period of three months, which means March, April and May put together, then the negative scenario starts playing out on the economic front which will be global in nature. India will also go through its impact." This three-month threshold for oil prices above $100 serves as a critical indicator for market stability. Bhattacharya summarized the outlook succinctly: "The base case is the majority of the event ends in April. The earnings impact is manageable and we go back to where we started the warlike scenario. But if it were not to happen, oil stays above $100 for three months… then economic circumstances is something that we need to be prepared for."
According to The Economic Times, Bhattacharya identified three key sectors where his outlook remains positive. Financial services stand out as credit growth shows signs of recovery, with expectations of credit growth moving up to 14% to 16% over the next three to six months. "We think that clearly credit growth has bottomed out and over the next three, six, nine months we will see credit growth move up to somewhere between 14% to 16% and as a play on the same financial services is a good place to be," Bhattacharya stated. Power sector continues to benefit from structural demand trends, with Bhattacharya noting that "power overall is a segment where we have been positive on… because as a growing economy the energy needs of the economy kind of grows multi-fold more than just the GDP." Capital goods - particularly short-cycle segments - are expected to gain from post-conflict rebuilding activity, as "as we come out of this conflict and as the rebuild phase starts to happen, you will see some of the capital goods companies benefit from the same." On the flip side, he remains underweight on telecom, utilities, and parts of the oil and gas sector following their recent rally. Within financials, Bhattacharya suggests taking a broader approach, exploring opportunities beyond large private banks and exploring PSU banks, NBFCs, and capital markets.
On the technology front, Bhattacharya struck a cautious tone, describing the sector as being in the midst of a structural shift driven by artificial intelligence. "We think that AI is like any other technology cycle which will reorient, which will create some newer avenues for growth and will take away some of the old ones. At the moment you are looking at a sector which is IT sector in the transition... During these periods generally the sector derates." Despite this transition phase potentially weighing on near-term performance, he remains watchful rather than outright negative. "We are marginally underweight and watching the data points carefully to see when the growth rates start to go better maybe in three to four quarters." This cautious approach reflects the sector's current adjustment period as AI integration reshapes traditional IT business models, with Bhattacharya noting that "strong is not the view that I have."
Recent weeks have seen renewed buying in midcap and smallcap stocks, a trend Bhattacharya views positively. "We are overweight on three areas where we think demand is relatively insulated," Bhattacharya stated, highlighting that "We have been positive on this space because on a relative basis we find the valuations during this correction for both mid and smallcaps have actually reached a five-year low versus broader markets. Structurally we feel that this end of the market, particularly the midcap end of the market, is that part of the market where we have relatively stronger business models that are gaining market share and… have better earnings growth." With valuations now at more reasonable levels, gradual allocation into these segments makes sense, particularly as investors position selectively focusing on sectors with structural strength while keeping close watch on evolving risks.
