Markets may remain volatile in the near term amid geopolitical tensions and rising crude prices, but strong domestic themes continue to offer opportunities, according to Shibani Kurian, Senior Fund Manager and Head of Equity Research at Kotak Mahindra AMC. “This is a market which is volatile and, of course, difficult to maneuver,” she said, pointing to the ongoing Middle East conflict as a key overhang.
“As long as the conflict continues and there is no resolution, we will have to navigate this volatility.” Despite the uncertainty, Kurian emphasised that the firm’s strategy remains “bottom-up and stock-specific,” with a focus on companies where “there is growth visibility” and structural domestic drivers remain intact.
Created with AI. Errors are possibleKurian noted that while headline Nifty earnings growth for Q4 FY26 remained in mid-single digits, the broader market showed stronger resilience. This has shaped portfolio positioning, with Kotak AMC maintaining a tilt towards large caps and select midcaps. “Nifty today trades slightly below its long-term average multiples,” she said, adding that midcaps, despite elevated valuations at a headline level, still offer “stock-specific opportunities” given their stronger earnings trajectory in recent quarters.
On sectoral outlook, Kurian expects FY27 earnings growth to remain in the mid-teens, although she cautioned that this estimate could come under pressure if geopolitical tensions persist. “If this conflict prolongs beyond a month or two, then FY27 earnings will have to be revisited,” she said. She identified parts of BFSI, healthcare, industrials and metals as key earnings drivers for the year, while warning that sectors exposed to higher input costs, such as autos and oil-linked businesses, could see near-term pressure.
Within financials, Kurian struck a constructive note, particularly on banks. “They have had a fairly difficult time and underperformed the markets, but from a fundamental perspective, loan growth is picking up and has become fairly broad-based,” she said.
She also highlighted improving deposit market share for large private banks and stable margins, adding that concerns around a spike in credit costs have not materialised. “Credit costs have been largely holding up… and many of these banks carry buffers in terms of contingency provisions,” she noted. With valuations trading below long-term averages and return on equity expected to improve, she said “valuations and earnings kind of fall into place” for the sector.
Kurian also reiterated a positive stance on healthcare, especially hospitals, citing a “strong earnings trajectory,” and on industrials, supported by robust order books tied to the domestic capex cycle. However, she cautioned that valuations in industrials remain “patchy,” requiring a more selective approach.
On the IT sector, Kotak AMC remains cautious amid structural and cyclical headwinds. Kurian flagged two key concerns: the impact of artificial intelligence and weak discretionary spending. “Given both these headwinds… we’ve been neutral to slightly underweight,” she said.
She added that management commentary so far does not indicate a meaningful pickup in demand. “There is no material improvement in demand, and in certain verticals there have been headwinds,” she said.
At the same time, Kurian pushed back against the view that AI could displace the industry entirely. “We are in the camp that AI does not kill IT services… it does provide opportunity for growth,” she said. However, she said that rising AI adoption is leading to pricing pressure, as clients demand productivity-linked cost benefits. “Competitive intensity has also gone up… and that is reflected in margins,” she noted, adding that the sector may remain “a trading kind of segment” in the near term.
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