Expert view: Vikram Kasat, Head Advisory, PL Capital, believes the Indian stock market is digesting macro stress and it is not a structural breakdown. His base case is range-bound consolidation, with a meaningful breakout after oil prices fall and FIIs turn buyers. He suggests using this phase to accumulate quality on dips rather than chasing. Among the sectors, he is positive on financials (BFSI), defence and capital goods, pharma and healthcare, and power. Edited excerpts:
What’s your medium-term outlook for the market, considering the headwinds in terms of higher oil prices, weaker rupee, and massive foreign capital outflow?
The near-term picture is genuinely guarded. Nifty is in a range-bound phase around 23,600–23,700, with Brent hovering near $105–111 and the rupee at record-weak levels around 96–97.
These three headwinds reinforce each other- higher oil widens the current account deficit, pressures the rupee, and amplifies FII selling. So expect choppiness over the next quarter or two.
But the medium-term picture (12–24 months) is more constructive than the headlines suggest. India’s structural story is intact: GDP growth tracking near 6.7–7%, RBI in an easing cycle (repo at 5.25%), and domestic institutions absorbing nearly all FII outflows.
The market is currently digesting macro stress, not a structural breakdown. My base case is range-bound consolidation now, with a meaningful breakout once oil cools and FII flows turn. Use this phase to accumulate quality on dips rather than chasing.
Don’t you think that the earnings of at least the next two to three quarters will show the impact of elevated oil prices? How should retail investors prepare for the second- and third-order effects of elevated oil prices?
You’re right that the next two to three quarters of earnings will carry the imprint of high oil.
The first-order hit is obvious – margin compression for oil-sensitive sectors (paints, tyres, aviation, cement, chemicals, OMCs facing under-recoveries).
The second and third-order effects are what investors underestimate: higher inflation squeezes household discretionary spending, which softens demand for autos, durables, and FMCG; higher rates-for-longer raises borrowing costs and can delay capex; and a weaker rupee inflates imported input costs across the board.
How should we rebalance our portfolio now? What should be the mix of equities, gold, and other asset classes?
This is a moment for discipline, not dramatic moves. A reasonable framework for a moderate-risk investor in the current environment:
Equities nearly 55–65%: Stay invested but tilt toward quality large-caps and away from expensive small/mid-caps; trim where valuations are stretched.
Gold nearly 10–15%: Gold has done its job as a hedge during this oil, rupee, and geopolitical stress, and a weak rupee adds to rupee-denominated returns. If you’re underweight, this is a fair level to build a position, but avoid chasing it after a sharp run-up.
Debt/fixed income nearly 15–25%: An RBI easing cycle is supportive; a laddered approach captures yield while rates drift lower.
Cash nearly 5–10%: Dry powder to deploy into corrections.
Which sectors are you bullish on for the next two to three years?
Financials (BFSI) is the backbone theme. Lower rates support credit growth in housing, autos, and MSMEs. We prefer quality private banks and select NBFCs.
Defence and capital goods also appear attractive due to strong order books and policy tailwinds. Valuations are rich, so be selective and buy on weakness.
Pharma and healthcare are relatively insulated from oil, with steady domestic and export demand.
Power, transmission and green energy look good due to a multi-year capex cycle in the grid and renewables.
Rural-led consumption is a recovery play as rural demand revives, though the timing of entry matters.
Inflation is expected to rise, and there are job-related uncertainties due to AI and a growth slowdown. Do you think the narrative around India’s consumption cycle has lost steam?
But the structural drivers haven’t broken: a young population with a median age under 30, rising incomes, formalisation, and rural demand are actually showing signs of revival.
The better way to frame it for clients is that consumption is shifting, not collapsing – rural and value segments are holding up better than premium urban discretionary, and income-tax relief plus lower rates should support a recovery into 2027.
So, it’s a pause in a long-term trend, not the end of it. Within consumption, be selective: lean toward staples and rural-exposed names over high-end discretionary until inflation eases.
Selectively, not blanket-avoid. Two forces are pulling in opposite directions.
On the positive side, a weak rupee is a direct tailwind – every dollar of overseas revenue converts to more rupees, which helps margins, and IT has been one of the relative outperformers in recent sessions.
On the cautious side, global demand is uneven, discretionary tech spending is soft, and AI is genuinely disrupting the traditional services model.
Is it better to avoid the IT sector or can we bet selectively?
The way to play it: this is a stock-pickers’ sector now, not an index bet. Favour companies demonstrating a credible AI pivot – those building AI into their offerings rather than being displaced by it – along with strong deal pipelines and capital discipline.
Mid-cap IT can outperform if the rupee stays weak, but it’s higher-beta, so size positions accordingly. Avoid names that are purely commoditised services with no AI strategy.
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Disclaimer: This story 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.
