Expert view: Selective bets & strong fundamentals amid global chaos, says Vinod Nair | Stock Market News
Expert view: Selective bets & strong fundamentals amid global chaos, says Vinod Nair
Early Q1 results have also helped reinforce expectations that Indian equities may outperform global peers over the medium term, aided by resilient domestic demand and more reasonable valuations
Indian equities continue to show notable resilience despite a difficult global backdrop marked by geopolitical tensions, volatile crude oil prices, concerns over the global technology sell-off, and slowing world growth amid persistent inflation. Although short-term volatility remains, domestic fundamentals continue to provide support. Early Q1 results have also helped reinforce expectations that Indian equities may outperform global peers over the medium term, aided by resilient domestic demand and more reasonable valuations. A key feature of the current market has been the ability of domestic indices to recover quickly from weakness like elevated crude price movement. In recent sessions, investors have largely looked past geopolitical concerns in West Asia, while the Nifty50 has found steady support in the 23,900–24,100 range, limiting downside risk.
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Q1 FY27 results continue to drive the Indian stock market
The initial set of Q1FY27 results and business updates suggests that earnings growth may be better than earlier feared. While growth remains uneven across sectors, the risk of broad-based earnings downgrades appears lower than anticipated. Expectations for Nifty earnings growth remain modest but constructive, supporting market valuations and investor sentiment. Management commentary so far, particularly from IT companies and banks, points to stable demand conditions and a gradual improvement in business activity. The IT sector has also seen a meaningful shift in investor perception. Concerns that AI could disrupt the traditional IT services model had weighed on valuations over the past year. However, recent developments suggest that AI could become a long-term growth enabler rather than a structural threat, with large AI-led transformation projects, improving technology spending intentions, and strategic partnerships creating fresh opportunities for Indian IT companies.
The banking sector remains a key pillar of market strength, led by the outperformance of private banks. Strong business updates from several lenders have reinforced confidence in credit growth, asset quality, and earnings visibility. PSU banks have underperformed recently, although they had attracted investor interest earlier in the year on the back of robust operating performance and improving balance sheets. Beyond banking, sectors such as real estate, textiles, jewellery, consumer durables, manufacturing, and selective small caps have shown relative strength, supported by favourable business trends, attractive valuations, and policy initiatives such as the India-UK trade agreement, the proposed US-India trade deal, Semicon 2.0, and the successor to the PLI scheme.
Market leadership, however, is becoming increasingly selective. Mid-cap stocks continue to trade at a premium to large-caps, making a stock-specific approach essential. While medium-term earnings expectations remain healthy, elevated valuations suggest that investors should prioritise quality businesses with strong execution capabilities. Small caps present a more nuanced opportunity. Although category-level valuations remain relatively high, underperformance in parts of the recent cycle has created selective value opportunities. As a result, bottom-up stock selection remains critical across both mid- and small-cap segments, with small caps currently offering a more favourable reward-to-risk profile than mid-caps.
Why large cap stocks has remained bullish?
Large-caps appear relatively better positioned from a valuation and risk-reward perspective. Sustained FII selling in the previous year brought valuations closer to long-term averages, making several large-cap names comparatively attractive. This segment offers a more balanced mix of earnings visibility, valuation comfort, and lower downside risk. Recent FII data also indicates some moderation in selling pressure. If India’s macro and earnings outlook continue to improve, renewed foreign inflows into domestic equities could gradually strengthen after the heavy selling seen in CY25-26.
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Looking ahead, investorswill closely track the earnings season, management commentary, inflation trends, monsoon progress, and global monetary policy signals. Geopolitical developments and commodity price movements may continue to trigger intermittent volatility, but the broader market outlook remains constructive. Reasonable valuations, improving earnings expectations, sector-specific opportunities in IT and banks, and India’s relatively strong macroeconomic foundation continue to support domestic equities. In this environment, a balanced strategy favouring large-caps and quality small caps, while remaining selective in mid-caps and sector-specific opportunities, appears most prudent.
The author Vinod Nair is the Head of Research at Geojit Investments Limited.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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