He sees the current situation as manageable, but only if disruptions remain short-lived. A prolonged conflict, particularly one that keeps crude prices elevated, could begin to weigh on both the macro environment and corporate earnings.
For now, earnings expectations remain largely intact. Prasad said, “We are still holding on to our 18% growth in that profits of Nifty50 Index by FY27.”
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He believes a large part of the market—such as IT services, pharmaceuticals, telecom, and parts of financials—is relatively insulated from immediate oil-related shocks. But sectors linked to consumption and discretionary demand could feel pressure if inflation rises.
Another key concern is India’s positioning relative to other global markets. While valuations in India are not excessive on an absolute basis, they look less attractive when compared to regions benefiting from strong themes like artificial intelligence and commodities.
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Countries like Taiwan and Korea are seeing strong earnings growth driven by the chip cycle, while commodity-heavy markets are gaining from rising prices. Against this backdrop, India risks losing investor attention in the near term.
“If you look at EM basket either you are competing with countries which have very high exposure to the AI trade and commodities and if this continues, that is the excitement around AI and commodities continue, then India will probably continue to get overlooked.”
This shift is already visible in foreign investor flows. Recent months have seen significant outflows, reflecting a broader rotation towards markets offering stronger near-term growth or thematic tailwinds.
Despite this, the medium-term story for India remains intact. Structural growth drivers are still in place, but in the near term, markets are likely to stay sensitive to global cues—especially oil prices and the duration of geopolitical tensions.
