Will stock market rally ahead? Where should investors put money now — Experts decode

With geopolitical tensions around Iran showing signs of easing, market experts say Indian equities may have entered a recovery phase after recent volatility. Deven Choksey, MD, DR Choksey Finserv, said the recent upmove in markets appears to be a “breather rally” following a sharp correction.

“After touching lower levels, the market has already recovered significantly. There may be another 200–300 points of upside left, after which some correction is possible,” he said.

He added that any correction at this stage should be viewed as a buying opportunity, as it would be part of a natural market cycle rather than a structural downturn.

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Stock-specific buying to take centre stage

Choksey said the focus is now shifting from broad-based moves to stock-specific opportunities. “With war risks receding and corporate earnings outlook becoming clearer for the April–June quarter, this is a good time to selectively buy companies,” he said.

He noted that Nifty 50 valuations remain reasonable at around 17 times one-year forward earnings, which limits downside risks in large-cap stocks. He added that investors may consider accumulating large companies during dips.

Oil-linked sectors may face near-term pressure

On sectoral trends, Choksey cautioned that commodity-linked sectors may see some pressure in the near term due to elevated input costs. “Companies with high-cost inventory may face mark-to-market impacts in the current quarter,” he said.

He added that sectors such as speciality chemicals and pharma may see margin pressure due to higher crude-linked input costs. Oil marketing and exploration companies may also remain cautious in the near term due to inventory adjustments.

However, he said any correction in these sectors could offer buying opportunities from a medium-term perspective.

Capital goods and banks are seen as preferred bets

Choksey said domestic-focused sectors are better placed in the current environment. “The overall environment for power and capital goods companies remains positive due to strong domestic demand,” he said.

He added that companies linked to the power sector may continue to see steady growth, despite relatively higher valuations. On financials, he said credit growth remains strong at around 16 per cent, supporting the outlook for banks and NBFCs.

“Large banks and NBFCs appear relatively attractive for investment at this point,” he said. He also highlighted opportunities in the automobile segment, particularly companies linked to electric vehicles.

Worst may be over; markets show resilience: Sinha

Sanjay Sinha, Founder, Citrus Advisors, said the worst phase for markets may be over, citing resilience despite multiple negative triggers.

“The sequence of events, including FII selling, rupee depreciation and crude spike, appears to have peaked. The market has shown resilience even in adverse conditions,” he said.

He noted that despite Brent crude rising to around USD 120 per barrel earlier and heavy foreign selling, markets did not see a deeper fall. “With crude now around USD 95 and signs of stabilisation emerging, the forward outlook is improving,” he said.

Investors can deploy 80% funds

Sinha advised investors to gradually deploy capital, with a staggered approach. “Investors can consider deploying about 80 per cent of their funds at current levels and keep 20 per cent for near-term uncertainties,” he said.

He identified key factors to watch, including crude oil prices, rupee movement, developments in the Middle East and corporate earnings commentary. On asset allocation, he suggested increasing exposure to mid- and small-cap stocks over the next three to six months.

“Historically, mid- and small-caps outperform in a rising market. Investors can rebalance portfolios accordingly,” he said.

Sectoral opportunities across cyclicals and defensives

Sinha said investors should diversify across both defensive and cyclical sectors. He suggested allocating 30–40 per cent to defensive sectors such as telecom, IT and pharma.

On the cyclical side, he identified four key opportunity buckets. “The first includes sectors benefiting from lower crude prices, such as auto, fertilisers and chemicals,” he said.

“The second includes sectors benefiting from improved gas supply, such as city gas distribution and ceramics.”

“The third includes companies likely to benefit from reconstruction activity in the Middle East, including engineering and pipe companies.”

He added that the fourth category includes sectors that have seen excessive correction and may witness recovery.

Crude oil may ease further

On crude oil, Sinha said prices may trend lower in the coming weeks. “Crude may gradually move towards $80 per barrel as supply conditions improve and structural demand shifts towards renewable energy continue,” he said.

On foreign flows, he said FII selling may reduce once currency stability returns. “When the rupee stabilises, foreign investors are likely to resume buying. India remains an attractive market in the emerging market space,” he said.

He added that strong domestic inflows, including SIP contributions of around Rs 32,000 crore per month, are providing stability to markets.