Markets have recently struggled to find direction. Even strong financial names have remained largely flat, reflecting the nervous sentiment across sectors. Garre believes the situation has evolved much faster than many analysts expected at the start of the year.
He explained that the present scenario is unusual because multiple narratives are colliding at the same time. Until recently, discussions around artificial intelligence and its impact on global employment dominated the conversation. However, the sudden escalation of geopolitical tensions has shifted the focus almost entirely toward oil prices and supply disruptions.
According to him, the issue is not limited to crude prices alone. The conflict has the potential to disrupt global supply chains, which could eventually affect corporate earnings across sectors. While the full impact may take time to reflect in company results, investors should prepare for some earnings pressure in the near term.
Despite the uncertainty, Garre believes investors should avoid trying to predict exactly when the war will end. Instead, the more practical approach is to extend the investment horizon and build portfolios with a 12- to 24-month perspective. Markets typically begin pricing in recovery well before the geopolitical situation fully stabilises.
He also suggested that current levels are not far from a potential bottom. While volatility may continue, valuations in several sectors have already corrected enough to attract long-term investors.
Garre pointed out that some sectors appear to have fallen more than their fundamentals justify. Financial stocks are one such example. Even though bank shares have corrected sharply, the broader economic indicators in India do not suggest a dramatic slowdown in credit growth or a sudden spike in bad loans. Because of this, the financial sector could see a meaningful rebound once market sentiment stabilises.
Telecom is another area that stands out. Some telecom companies have witnessed steep declines despite having relatively stable earnings visibility. Garre believes this disconnect between fundamentals and stock performance could create opportunities for investors willing to take a longer view.
On the broader earnings outlook, Garre expects Nifty earnings growth for FY26 to remain modest at around three to four per cent. For FY27, growth expectations have already been revised down to around the high single digits. While this is lower than earlier projections, it still does not indicate a severe economic slowdown.
In terms of valuations, he believes India may settle into a slightly lower price-to-earnings range compared with the past couple of years. While the market earlier traded at premium multiples above twenty times earnings, a range closer to eighteen to nineteen times appears more realistic in the near term. However, this should not necessarily be seen as negative, as moderate valuations can support healthier long-term market performance.
Global fund flows are also influencing valuations. Some foreign investors have been shifting money from relatively expensive markets like India toward cheaper emerging markets such as China and South Korea. Even after recent corrections, India continues to trade at a premium compared with many of its peers.
Another important factor shaping market sentiment is the evolving narrative around artificial intelligence. Garre believes the current concerns about AI hurting India’s IT services sector may be exaggerated. According to his research and discussions with technology professionals worldwide, the large-scale adoption of AI across enterprises is still at an early stage.
