Rohit Seksaria: Crude Oil Correction on the Horizon Could Spark India’s Next Major Market Surge
Recent insights from Rohit Seksaria, Senior Fund Manager at Sundaram Mutual, indicate that Indian equities are poised for a more constructive phase following a period of macroeconomic pressure. A significant factor contributing to this shift is the retreat of crude oil prices, now positioned below $75. This development is considered pivotal as it alleviates inflation and currency risks that have previously strained market sentiment, fostering a more favorable outlook for Indian macro stability. As G-Sec yields soften and the Reserve Bank of India’s new FCNR deposit scheme stabilizes the rupee, Seksaria expresses a bullish stance on the markets heading into FY27, despite current valuation levels hovering near 18 times one-year-forward earnings.
However, Seksaria anticipates some near-term challenges, particularly regarding earnings growth, which is projected to face downgrades as elevated raw material costs, particularly from the oil and petrochemical sectors, impact profit margins over the next few quarters. He characterizes this downturn as a temporary disruption rather than a long-term trend, predicting a return to normalized growth patterns by the latter half of FY27 as companies adjust their inventory costs. This outlook suggests cautious optimism; while immediate earnings may dip, the underlying conditions for a rebound appear to be solidly in place.
The financial services sector remains a focal point for Seksaria, characterized by robust system-wide credit growth exceeding 17% and healthy asset quality metrics. He identifies banks and non-banking financial companies (NBFCs) as key areas for potential re-rating, although he tempers expectations regarding price-to-book ratio recoveries without significant foreign institutional investor participation. Despite ongoing foreign capital outflows, particularly in favor of markets like Korea and Taiwan, Seksaria believes that India’s earnings growth profile is fundamentally stronger and more durable, enhancing the potential for long-term investor interest, even amid current cyclical pressures.
Outside the banking sector, Seksaria has identified various thematic opportunities within India’s economy. He points to growth potential in data centers, selective hospitals in the pharmaceutical space, niche IT companies focused on engineering technology, and certain auto ancillary firms that are capturing increased market share. Although he adopts a neutral stance on consumer discretionary stocks after their recent performance, he sees potential rebounds in segments tied to crude derivatives due to the recent price correction. In summation, if oil prices stabilize at current levels, Seksaria anticipates fading inflationary pressures, a return to normalized earnings, and a potential resurgence in bank stock valuations, laying the foundation for a broader market recovery.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)