Lokapriya points out that fear, rather than valuations, is driving market sentiment, with investor bearishness at its highest levels since 2009.
He discusses the potential impact on India’s economy, sectors to watch amid global uncertainties, the outlook for corporate earnings, and how investors — both domestic and foreign — are positioning themselves in these volatile times. Edited Excerpts –
Q) We started off April or the new financial year on a volatile note with tariff uncertainty. What is your take on markets for FY26?
A) The markets resumed their fall on the 3rd of April due to the US imposing Tariffs on goods imported from 180 countries into America. The tariffs were imposed to lower trade imbalances and deficits in the U.S.A. Markets fear that Trump’s tariffs could raise US inflation, pulling down economic growth worldwide. Fear is the driving force in the market rather than valuations. The 90 day pause on tariffs gives countries to reach bilateral agreements with the US and hence FY26 is likely to be very volatile.
Q) What is your take on US Tariff introduced by the Donald Trump government. How will it impact economy and Indian markets?
A) The Indian Govt is among 6 out of 180 countries that have offered concessions on US imports into India and would viewed positively by Trump.Q) The chatter of a global slowdown becomes louder with new tariff measures in place from the US. How would that impact India and global economic growth?
A) Indian Govt sources indicate a 90-day pause. Until then, 10% tariffs apply.
Piyush Goel, Minister of Commerce, leading a team working with the US Govt to arrive at a bilateral agreement. However, in the interim GDP growth is likely to slowdown by 30 to 50 bp.
Q) Gold hit fresh record high while equity markets witnessed a knee jerk reaction post tariff announcement. Does it make sense to increase allocation towards Gold?
A) With Gold at all time highs, it is recommended to have a neutral allocation to Gold.Q) Do you think earnings of India Inc. might take a hit with tariff measures which would in turn result in earnings downgrades?
A) The tariff uncertainty is likely to make companies pause on new capital expenditures and expansion plans until the new tariff rates are finalized over the next 90 days until June. As a result, it is likely that Corporate India would remain cautious leading to 3-5% earnings cut for FY26.
Q) Which sectors should one look for to deploy fresh money amid tariff and global economic slowdown?
A) Incrementally staggering purchases in domestic sectors such as Financial Services and consumer discretionary could be considered, depending on one’s ability to put capital at risk.
Q) How are HNIs and big-ticket investors allocation money? Are they diversifying globally or buying treasures to protect the portfolio?
A) Investors are likely to remain fairly liquid and deploy on corrections. Investor bearishness is the highest since March 2009.
Q) After recent correction how is India placed among EM players in terms of valuations?
A) While valuations are one standard deviation below 5-year averages, further fall is not ruled out until bilateral trade talk news between India and the U.S. trickle out over the next several weeks. Accordingly, markets would be volatile as they digest news flow.
Q) How should one play small & midcaps in FY26?
A) Investors should focus on companies which have strong earnings outlook, irrespective of whether they are large, mid or small cap companies.
Q) What about FIIs? What is the trend you see for smart money moving back to India?
A) Interest rates need to fall further in India, which would aid as a growth catalyst. FII will return to India once they see evidence of earnings growth revival which is at least couple of quarters away.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
