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Last financial year has been one of the volatile years where the first nine months were extremely positive, followed by extremely volatile last quarter driven by the Russia-Ukraine war.
Given the ongoing uncertainties, what does the near term look like? Let’s see what experts have to say.
What to expect
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India MF
- A lot depends on the extent and outcome of the ongoing Russia-Ukraine war
- Early resolution of the conflict between the two countries and resultant cooling off of inflationary pressure would be positive triggers for the markets
- With high chances of rising interest rate cycle, there is hardly any scope for rerating. A lot would depend on earnings. If earnings meet expectations then valuations won't be a big hindrance to returns
Santosh Singh, Fund Manager, Motilal Oswal MF 
- Downgrades may happen to the Nifty earnings per share (EPS) numbers which can keep markets under pressure
- An end to the Russia-Ukraine war and earnings momentum are the key market triggers in the near term
- Valuations have seen significant changes based on Foreign Institutional Investors (FIIs) ownership. Segments (like financials) with high FII ownership have seen big corrections while areas in the midcap space with low FII ownership have seen increasing valuations
Shridatta Bhandwaldar, Head - Equities, Canara Robeco MF
- Due to the existing complexities on the energy side and reversal of monetary and fiscal policies globally, markets are likely to consolidate in a band in the near term and will largely depend on earnings over the next two quarters
- Energy and commodity prices coming off the highs, remain the key trigger for markets. If not, we might witness earnings downgrades in several sectors over FY23 which is a possible negative trigger
- Valuations from a medium-term perspective have clearly become fair for largecaps. After the large outperformance over the last 2 years, medium and smallcap have selectively become attractive
Commentary on sectors
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India MF
- From medium term perspective, we recommend financials and capital goods sector to participate in domestic cyclical recovery
- Within defensive, IT services offer decent earnings visibility
Santosh Singh, Fund Manager, Motilal Oswal MF
- Given the strong fundamentals, we are bullish on the financial sector. Lenders, specifically are in the sweet spot due to strong balance and favourable NPL (Non-Performing Loan) cycle
- Commodity-driven sectors and real estate may also do well in the medium term
Shridatta Bhandwaldar, Head - Equities, Canara Robeco MF
- In volatile times like these, one should work with a diversified portfolio rather than focusing on a particular sector
- Having said this, domestic cyclicals and IT might experience relatively healthy earnings growth over the next 18-24 months
What to recommend
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India MF
- Multicap funds within a diversified category
- Given that volatility may remain elevated in the current environment, exposure to asset allocation products like balance advantage funds and multi-asset funds makes a lot of sense
Santosh Singh, Fund Manager, Motilal Oswal MF
- Largecaps may do better in the near term if we see stability in the geopolitical environment
Shridatta Bhandwaldar, Head - Equities, Canara Robeco MF
- Diversified portfolios for complex environments like these
