Expert view: Rishabh Nahar, Partner and Fund Manager at Qode Advisors, is cautious about the Indian stock market as he believes a fresh flare-up in geopolitical tensions, a hawkish surprise from the US Fed, or a US tariff setback could quickly reprice risk. In an interview with Mint, Nahar said he expects a gradual, earnings-led rise in the market rather than a smooth rally. Edited excerpts:
After a tumultuous first half, can the Indian stock market stage a healthy rebound in the second half, even as geopolitical uncertainties remain a key risk?
I’d call it a cautious “yes, but not in a straight line.” The first half was rattled by the Iran-related Middle East flare-up, Strait of Hormuz risk, tariff uncertainty and a sharp AI-led correction in IT.
Several of those pressures have eased, crude has pulled back to pre-escalation levels, FII selling has slowed, and there’s renewed optimism around an India-US trade deal.
Bank Nifty’s resilience through the volatility is also a healthy sign.
That said, calling it a clean V-shaped rebound would be premature.
After five quarters of depressed earnings, consensus is finally looking for a pickup, helped by GST 2.0 and income-tax relief feeding into consumption.
But geopolitical risk hasn’t disappeared; it’s dormant, not resolved.
Any fresh flare-up in West Asia, a hawkish surprise from the US Fed, or a tariff setback could quickly reprice risk.
My base case is a gradual, earnings-led grind higher with bouts of volatility, rather than a smooth rally, which makes stock selection more important than chasing the index.
Major macro risks in terms of oil prices may be behind us, but the focus is now on the prospects of a poor monsoon. What is your assessment of macro risks?
The oil relief is real. Brent easing back into the low-to-mid $70s takes pressure off the import bill, the rupee and the inflation trajectory, which is a genuine tailwind.
But I wouldn’t say we’re out of the macro woods.
The IMD’s own forecast pegs this monsoon at around 92% of the long-period average, technically “below normal.”
Ground progress through June has actually been reasonably on schedule across most regions, with a few pockets even seeing above-normal rainfall, so it isn’t a washout scenario yet.
But a weak or unevenly distributed monsoon would hit rural demand, keep food inflation sticky, and complicate the RBI’s job, which it has already nudged its FY27 inflation estimate up to around 5.1% on the back of energy and input-cost pressures.
So the risk baton has effectively passed from “energy shock” to a combination of “agri/rural demand” and “global monetary policy”, a hawkish Fed and a still-cautious, neutral-stance RBI. Both deserve close tracking into the second half.
The banking sector is seen as a proxy for economic growth. What is your outlook for the sector amid the prospects of interest rate hikes? How would you recommend retail investors look at this sector?
The RBI has held the repo rate at 5.25% for three straight meetings and kept a neutral stance; it isn’t hiking, but it’s also signalled that a cut isn’t imminent, given inflation risks.
The bigger overhang is actually global: a hawkish Fed keeps bond yields and the dollar firm, which has knock-on effects for liquidity and NIMs here too.
Even so, banking fundamentals look reasonably healthy. Credit growth is holding up, asset quality is benign, and the RBI’s recent liquidity-easing steps (like allowing loans against foreign-currency deposits) are supportive.
That’s part of why the sector has held up better than IT through this volatility.
For retail investors, I’d treat banking as a core, structural India holding rather than a short-term trade. It’s a reasonable proxy for credit penetration and formalisation.
Favour large private and well-run PSU banks with strong deposit franchises and clean balance sheets, build positions via SIPs/staggered buying rather than lump sum, given the rate uncertainty, and be more selective with NBFCs that are more sensitive to funding costs.
Is the IT sector a bet at this juncture? What are the key factors investors should consider before investing in an IT stock?
IT has had a brutal run. The Nifty IT index is down over 30% year-to-date, hit multi-year lows, and Accenture’s guidance cut added to the gloom.
The core worry is structural: agentic AI tools are seen eating into application development, testing and maintenance work, which is a meaningful chunk of industry revenue, with some estimates of a 10-12% revenue hit over the next 3-4 years.
The flip side is that valuations have reset sharply, and large IT names are now trading much closer to broader-market multiples than their historical premiums, which is starting to look interesting for patient investors.
But near-term earnings are still likely to disappoint for a few more quarters.
Before buying, I’d weigh: how clearly a company is articulating its own AI strategy and disclosing AI-linked revenue; deal-win momentum and the mix of annuity versus discretionary revenue; client budget trends in the US and Europe; and how much of the rupee’s weakness offsets the pricing pressure.
Right now, IT is a “show me” sector selective, bottom-up bets in well-capitalised, diversified players, not a sector-wide call.
Which sectors do you believe can generate alpha this year?
I’d lean toward domestic-facing, consumption- and formalisation-linked themes over export-facing ones this year.
Banking and insurance benefit from rising financial penetration and household savings moving into formal instruments.
Consumers benefiting from GST 2.0 and the income-tax relief on autos, durables, branded retail, and quick commerce should see a demand bump in the festive season.
Property and select capital-goods/infra names also look reasonably placed as private capex starts to revive.
I’d be more selective in IT and globally cyclical exporters, given the headwinds discussed above, and would look for alpha in names gaining market share from unorganised competition rather than simply riding a sector-wide re-rating.
Investors appear to be in a fix due to the fall in equities as well as in gold and silver prices. What should their investment strategy be at this juncture?
It’s worth putting the bullion fall in context. Gold and silver corrected sharply after a hawkish Fed dot-plot strengthened the dollar, but silver, for instance, is still up well over 100% from a year ago even after the pullback.
This reads more like a healthy correction after an exceptional run than a structural reversal, just as the equity wobble looks more like consolidation than a trend change.
My advice would be: don’t make panic decisions in either direction.
This is a reasonable window to rebalance back toward your target asset allocation rather than abandon any single asset class.
Continue staggered/SIP investing in equities through volatility; treat dips in gold and silver as opportunities to top up a long-term allocation (typically 10-15% of a portfolio) rather than going all-in at once; and maintain an adequate debt/liquid allocation given the uncertain global rate path.
Diversification across equity, debt and gold remains the best cushion when multiple risks, such as Fed policy, the monsoon, and sector-specific IT disruption, overlap.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
