Speaking to CNBC-TV18, Jain said that while Indian markets have seen a sharp shift in positioning amid global volatility, valuations are no longer a major concern for investors. “Sentiment is down to about 1% bullish, which is among the lowest outside COVID and the GFC. Valuations are now far more reasonable—below the 10-year average, slightly above the 20-year average,” he said.
Indian markets have been on a roller coaster ever since tensions in West Asia escalated, with volatility rising and commodities witnessing sharp moves. Global cues have remained uncertain, and the premium enjoyed by Indian equities compared with emerging markets and global peers has narrowed significantly.
Jain noted that markets are typically driven by a combination of valuation, sentiment and narrative, and while the first two have adjusted meaningfully, the latter is still missing. “What is missing is narrative, which usually follows performance. So valuations are not extremely cheap, but they are far more palatable now. Complaints about India should reduce,” he added.
He also cautioned that the recent spike in crude oil prices could weigh further on earnings expectations. According to him, crude prices could remain 20–25% above pre-war levels for several months due to supply uncertainties and restocking demand. Consensus earnings estimates for the Nifty have already been cut by about 2.5%, but he believes the impact of higher oil prices is not fully reflected yet.
“Even if the conflict ends soon, crude may settle between $80–90. I doubt if people have fully built in $100 crude in their estimates,” Jain said, indicating the possibility of further downgrades.
From a portfolio perspective, he advised caution on high-valuation stocks in a higher inflation and higher bond yield environment. “In a post-war environment with higher inflation and bond yields, the focus should be on real assets and upstream businesses. The more upstream you are, the better your pricing power,” he said.
Sharing a similar macro view, Anand Shah, CIO–PMS & AIF at ICICI Prudential AMC, said the current environment points to a structural shift towards higher inflation, driven by factors such as de-globalisation, supply chain disruptions and rising energy costs.
“Even before this crude shock, there were reasons to believe inflation would be higher than what we saw between the GFC and 2020–21. Now add oil to this—energy impacts fertiliser, food, plastics—it is pervasive. So inflation is here to stay,” Shah said.
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He added that this shift would change investment preferences, with manufacturing and upstream sectors likely to outperform consumer-facing businesses, which may struggle to pass on higher costs. “We prefer core and intermediate manufacturing over consumer-facing sectors,” Shah said, noting that stock selection will remain critical in the current environment.
Both experts also highlighted that India’s relative positioning in global portfolios has changed after a period of strong outperformance, with foreign investors likely to return only gradually as global conditions stabilise.
