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May was an eventful month for the equity markets as they saw multiple geopolitical escalations including the India – Pakistan conflict which increased uncertainty in the markets. The global markets heaved a sigh of relief after a US court blocked the proposed tariffs.
Domestically, the last quarter results offered a mixed bag. While sectors like manufacturing, auto ancillaries, and select private banks reported favorable results, export-oriented sectors like IT and rural-oriented FMCG remained under pressure. FPIs reported strong inflows for second month in a row while SIP flows from domestic investors remained strong.
Cafemutual spoke to Bhalchandra Shinde, Associate Fund Manager, Motilal Oswal MF, Nikhil Rungta, Co-CIO Equity, LIC MF and Satish Ramanathan, CIO - Equity, JM Financial MF share their views on the current state of the equity market and what can we expect from it in June.
Events to look forward to in June
All three experts are looking forward to the Monetary Policy Committee (MPC) meeting in June which could bring a rate cut and the actions of the US Federal Reserve after its meeting which could decide the trajectory of the global markets.
Bhalchandra has the trade relations between India and the US in focus, which aims to address tariff issues and enhance bilateral trade, potentially benefiting export-oriented sectors such as IT, pharmaceuticals, textiles, and specialty chemicals. He thinks that the OPEC+ meeting on June 1 could also have an impact on inflation and sectors like transportation, logistics and petrochemicals.
Nikhil thinks that the aftermath of Operation Sindoor could lead to potential shifts in defence policy, budgetary allocation, and geopolitical risk premiums which could open up opportunity in India’s defence and aerospace manufacturing sectors. He is also looking forward to a normal monsoon which could boost rural demand and ease margin pressures in consumption-linked sectors.
Satish believes that domestic economic data, like GDP and industrial output, is likely to influence market sentiment. He will also focus on the US macroeconomic data and the progress of the India – USA trade negotiations.
Medium term equity outlook
Bhalchandra thinks the anticipated trade agreement with the US, potential monetary easing by the RBI, and favorable monsoon predictions are expected to provide confidence to investors. These factors, along with strong domestic consumption and ongoing policy support suggest a conducive environment for market growth in the medium term.
Nikhil believes that the combination of low crude prices, stable currency, healthy tax revenues and strong domestic consumption provides a solid platform for growth. He adds that while Operation Sindoor temporarily raised market volatility, India’s ability to manage its geopolitical risks with composure has reinforced investor confidence.
He is positive about corporate earnings as they continue to trend upward, especially in industrials, capital goods and BFSI sectors. He picks formalization, infrastructure expansion and manufacturing localization as the long-term secular themes. However, he also warns about expensive valuations in some pockets of the market which may undergo time-wise consolidation in the near term.
Satish adds that Indian markets may continue to see improved allocations from Foreign Portfolio Investments (FPIs) on the back of the record sell off since September 2024. He thinks that the lowering of commodity prices could lead to better corporate earnings while lower oil prices and fertilizer subsidies can help the government reduce interest rates. He also believes that with improvement in job creation and lower prices, consumption could revive. At the same time, he warns about a possible slowdown in India’s IT sector due to change in technology which could impact demand for housing, office space and urban middle class goods such as cars, consumer durables and services such as Quick Service Restaurant (QSR) and online platforms. He cautions the investors saying that though market valuations are reasonable, they are not cheap.
Recommended funds
Bhalchandra Shinde: Manufacturing and infrastructure-focused equity funds are poised to outperform over the next six months. Moreover, SIP flows are supporting thematic funds, offering valuation comfort compared to high-P/E tech or consumption sectors.
Nikhil Rungta: Flexi cap funds and multi cap funds can be well-suited for navigating a market that is stock-specific and sensitive to global flows. For those seeking lower volatility, multi asset allocation funds may help in providing diversification.
Satish Ramanathan: Investors with high-risk appetite can start investing in higher risk funds such as mid cap funds, in consultation with their MFDs/advisors. Investors with moderate risk profiles can consider hybrid funds such as aggressive hybrids for investment.
