Expert View: Amid rising crude oil prices, persistent FII outflows and growing geopolitical uncertainty, Indian equity markets are navigating a difficult phase. Yet, retail investors continue to stay invested through SIPs, and domestic inflows remain resilient. In an interview with Mint, Devang Mehta, Deputy Managing Director & CIO – Equity NDPMS at Spark Capital Private Wealth, shares his views on whether investors are underestimating risks, the outlook for earnings and interest rates, and where the next big wealth-creation opportunities may emerge. Edited excerpts:
Indian stock market is facing a crude oil shock and a possible earnings slowdown. While FIIs have sold heavily, retail investors remain put. Do you think they are underpricing geopolitical risks?
Foreign investors have aggressively exited Indian equities in the first four months of the calendar year 2026 (over 2.06 lakh Cr), driven by high oil prices, surging US yields, and the Iran war, with selling in early 2026 already exceeding the full-year total of 2025.
While it may appear that retail investors are under-pricing geopolitical risks by staying invested, the situation is more nuanced. Retail investors are likely leveraging rupee-cost averaging through SIPs, prioritising long-term goals over immediate volatility
They have shown remarkable consistency, choosing discipline, patience and conviction in investing over panic. This steady participation exhibits a growing shift in mindset. Investing is no longer about timing the market or reacting to every possible stimulus, but about staying invested through difficult cycles to create long-term wealth and stay true to your goals.
However, if the geopolitical crisis creates a sustained surge in crude oil and hence derails the earnings cycle, which in turn will make markets more volatile and uncertain, the current conviction of retail investors will be tested.
Indian market’s underperformance vs global peers is stark. For a retail investor, would it make sense to raise global exposure?
Given that India has underperformed while other markets (like the US) have hit new highs, gradually increasing global exposure makes sense for diversification. It provides a hedge against a weaker local currency and domestic market consolidation. But it has to be an extremely thought-through and measured approach guided by professional advice and suitable products.
Middle East crisis, lack of trade deal and FII selling: Multiple headwinds are underway on D-Street. What would you advise an investor who is facing such selloff for the first time?
Historically, Indian markets have shown a capacity to absorb international geopolitical noise, particularly when local economic fundamentals like strong bank credit growth, public and private capex growth remain intact. While short-term noise can create volatility inside the investor’s mind, it’s very important to stay the course and refrain from frequent churning and trading.
The most crucial rule is not to panic. Selling at the bottom turns a “notional” loss into a “real” loss. If you have a long-term horizon (3+ years), view this correction as a routine cleansing of market excesses, not the end of the India growth story. Keep your SIPs active and/or selectively pick quality businesses in India. Smart Investors view adversity and market downturns not as disasters, but as the primary mechanism for building long-term wealth.
Avoid the noise and keep your poise. Once you move away from focusing on the noise to focusing on the fundamentals, financial health, business quality, good management, and long-term growth potential, you become a logical investor rather than an emotional one.
How do you assess the earnings season so far? Which segment is emerging strongly?
As of mid-May 2026, the Q4 FY26 earnings season in India is largely characterised by strong, positive surprises in net profit, but with rising concerns over margin pressure due to increased input costs. While headline Nifty companies are performing reasonably well, the broader market—specifically mid-caps and select small caps—is exhibiting superior growth and driving the overall market sentiment.
Defence & Industrials are benefiting from strong long-term order books and government spending on infrastructure and self-reliance. E-commerce (e-retail) is enjoying robust demand, while auto companies are seeing growth in specific segments. Power & Renewable Energy: Companies are experiencing high momentum, in line with global sustainability trends. Hospitals and diagnostic chains are emerging as quite outperformers, driven by rising demand for personal care. Increased market activity and higher trade volumes have boosted financial services, with many mid-cap firms showing strong earnings growth. Banks are witnessing a trend of improving asset quality, with GNPA ratios hitting multi-year lows for several institutions.
Petrol and diesel prices have been hiked. Will it complicate RBI’s inflation math and do you see any rate hikes going ahead?
The fuel price increase is expected to directly add approximately 10-15 basis points to Consumer Price Index (CPI) inflation, with higher indirect costs for transportation and logistics likely to push this impact higher. The increase in diesel prices is of particular concern because it elevates transportation and freight costs, causing a cascading effect on food and essential goods, which may lead to higher core inflation.
While the RBI has been on a pause with the repo rate at 5.25% (following cuts in 2025), the recent fuel hike makes an immediate rate cut unlikely. The RBI has indicated a “data-dependent” approach, with Governor Sanjay Malhotra stating they may “look through” temporary shocks but will take action if inflation becomes “entrenched”. Also, any potential El Niño effect could further strain food inflation alongside energy costs.
While the immediate fuel price hike is relatively modest, the risk of a “staggered” series of future increases means the RBI will likely maintain a tight, or “higher for longer,” monetary policy stance in 2026.
What would make you materially more bullish on Indian equities over the next 12 months?
The market is a slave to earnings. Becoming materially more bullish on Indian equities over the next 12 months hinges on accelerated earnings after a six-quarter slowdown, paired with RBI rate cuts, continued government infrastructure spending, and robust domestic institutional investor (DII) inflows counteracting FII outflows. Also, the elusive arrival of FPIs sooner than later would be the icing on the cake.
Indian equities are entering a rare phase driven by policy stimulus, improving earnings, weak foreign positioning and attractive relative valuations. With macro stability improving and growth accelerating, once the dust settles, Indian markets will likely start to perform at least in line with the earnings growth.
What does the next big wealth-creation theme in Indian markets look like from here?
Big wealth creation themes and ideas will likely be from the broader markets, which still don’t have their representation in the key benchmark indices. There are strong tailwinds in sectors like power automation, HVDC, capital goods and infrastructure, defence, energy transition (renewables/green hydrogen), semiconductors, and data centres.
Apart from these, the capital market theme, which has a number of sub-sectors like AMC’s. Wealth management entities, exchanges, depositories and financial intermediaries should continue to do well on the back of the increasing trend of financialization and the need to professionally manage money for the growing number of millionaires and billionaires in India.
Discretionary consumption-oriented sectors, which involve premiumisation and aspirational demand for cars, experiential travelling, hotels, high end retail, should also be part of long-term wealth creation portfolios.
The focus should be to shortlist and nibble into companies with strong earnings, cash flows, robust corporate governance and solid balance sheets.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
