Speaking to ET Now during a volatile trading session, Anand Tandon, Independent Analyst struck a note of caution, arguing that the current correction, while uncomfortable, does not qualify as chaos.

“I would hesitate to call a 1% odd cut in the market as mayhem given where we are in the geopolitics and our own earnings growth versus valuation,” Tandon said, pointing out that Indian equities remain among the most expensive in the emerging market pack.

He noted that even without the trigger of tensions in the Middle East, domestic markets were trading at stretched valuations relative to growth prospects. “If you look at emerging markets generally, you are looking at markets which are likely to do 20% plus earnings growth and are trading at about two-thirds the valuation that we are in,” he observed.

According to Tandon, India’s growth may improve marginally this year compared to the previous one — but that optimism hinges on geopolitical stability. In such a backdrop, he sees little merit in aggressive dip-buying. “I do not think that there is any argument to be made for rushing out and buying in a hurry,” he said, advising investors to focus on fundamentally sound stocks that have corrected meaningfully and to wait patiently for attractive entry points.

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Banking: Selective Exposure Preferred
On the banking space, particularly public sector banks, Tandon acknowledged that valuations appear reasonable and balance sheets are cleaner than in the past. However, he flagged a potential risk as the credit cycle gathers pace.
“Credit growth has started to pick up again and companies have started to go out there and borrow, which means that there is a great opportunity to build up a crap portfolio — and I choose my words carefully,” he remarked, stressing the need for prudence in fresh lending.He cautioned that public sector banks are not always known for disciplined credit underwriting. While making an exception for State Bank of India, citing its strong credit history, he advised investors to tread carefully. “If you have to be in banking, which is something I would recommend that people continue to remain in, you are probably better off being among the larger banks in the private sector and the public sector,” he said.

Aviation vs Engineering: Clear Preference
When asked to choose between aviation and engineering, Tandon was unequivocal. “If the choice is between aviation and engineering, I would prefer engineering at any time,” he said.

While acknowledging that Larsen & Toubro is not cheap, he believes any meaningful correction could present a buying opportunity, especially given the company’s exposure to regions currently under conflict. “These are not companies that you get cheap very often,” he noted, adding that near-term execution challenges or earnings slowdowns should not overshadow long-term strength.

On aviation, he remained unconvinced. “I have never managed to find myself convinced that aviation is something that will be able to generate profits over a sustained period of time,” he said.

Autos and Ancillaries: Look Beyond the Obvious
Despite in-line February numbers and strong management commentary, auto stocks were among the worst hit in the session. Tandon attributed part of the weakness to heavy ownership in the sector.

“The numbers are coming through quite well and most of the management commentary seems to indicate that the order books are fairly robust,” he said, suggesting that domestic demand remains healthy.

However, he encouraged investors to look beyond frontline automakers. “There may be other ways to play that as well besides the auto, which is the auto ancillaries,” he said, recommending companies insulated from technological disruption and those with global exposure.

IT: No Immediate Triggers
On information technology, Tandon offered a blunt assessment. “Broadly, I see no reason for me to be very bullish on IT at this stage,” he said.

He believes investors must first assess the long-term impact of artificial intelligence before turning constructive on the sector. “We need to let the technology settle down and see how far AI is able to take things,” he said.

With domestic hiring trends flat to negative, he sees little evidence of near-term momentum. “We have negative to zero hiring in IT in the domestics in the current year, I think that tells its own story,” he added.

Geopolitical Wildcards
On the broader geopolitical shock, Tandon refrained from making bold predictions. “Clearly two options — one, the Iranian regime collapses immediately, in which case obviously all things can go up. On the other hand, you could have a missile from Iran go and hit one of the major platforms of the US and then you have trouble,” he said.

In the end, he admitted that forecasting outcomes in such an environment is futile. “Your guess is as good as mine, I do not think there is an answer one can make there.”

For investors navigating the crosscurrents of valuation concerns, sector rotation and geopolitical risk, the takeaway appears clear: discipline, patience and selectivity matter more than bravado.

Indian companies may be among the most impacted in Asia by the Iran war, according to Goldman Sachs, which estimates a 20% rise in the price of Brent crude would cut regional earnings by 2%. Societe Generale expects India’s underperformance to deepen given its high dependency on imported energy, while Natixis labels the country’s assets “most at risk” for the same reason.

India’s $5 trillion equity market has lagged most major peers since late 2024, on weaker earnings growth and lack of exposure to artificial intelligence-related shares. The surge in the price of oil — the country’s top import — has dampened a nascent recovery in stocks since India’s trade deal with the US. Analysts expect it to drive inflation, and weaken the economy and currency.

“With Middle East tensions showing little sign of easing, supply risks remain high, leaving room for oil prices to move higher in the near term,” said Dilin Wu, a research strategist at Pepperstone Group. “India’s heavy reliance on imported crude — most of it from the Gulf — makes its market vulnerable. Prolonged higher oil prices could widen the import bill, strain the current account and rupee, and put additional pressure on equities.”

Bloomberg

Stocks are likely to be under pressure Wednesday as traders return from a holiday. The jump in Brent prices already pressured the Nifty Index on Monday, and it closed down more than 1% that day. If history is a guide, that weakness may continue for some time.

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The start of the Russia-Ukraine war resulted in the Nifty correcting by around 10% in the first half of 2022, Citigroup analysts including Samiran Chakraborty wrote in a note. “A 10% rise in oil prices leads to 30 basis points of upside pressure on inflation and 15 basis points downside on growth,” they said.
To be sure, some investors are more optimistic about India. BNP Paribas says Indian stocks should outperform in coming months as the risk/reward balance is skewed to the upside.Still, more investors are seeking alternatives to Indian stocks. SocGen recommends going long Asia ex-Japan shares while shorting those from India, while Sanford C. Bernstein expects a drawn-out Iran conflict may continue to depress the index from its Monday close of 24,866.

A more prolonged escalation “could push the Nifty below 24,500,” Bernstein analysts including Venugopal Garre wrote in a note. “In particular, we see higher risk for energy, travel and trade-linked names, and construction companies with meaningful Middle East and North Africa exposure.”