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“India has a fortress balance sheet which is bullet-proof on all fronts—public finance, external account, banking system and corporate leverage. This keeps India’s growth story (macro and earnings) more durable and limits the second-order impact,” Seshadri Sen, head of research and strategist at Emkay Global Financial Services said in his ‘India Strategy’ report.
The Indian equities market, he added, has reduced dependence on overseas or foreign institutional/portfolio investors (FIIs/FPIs) which should help ride out this period of uncertainty.
As a strategy, the report said investors could use any near-term correction, on the back of the global risk-off, political instability, regulatory risks, and rich valuations, as an entry opportunity from two-three years’ perspective.

Where to bet? Which sectors to invest in?

According to Seshadri Sen, India’s growth and earnings outlook underwent a long-term pivot post the Covid-19 pandemic, when the government invested heavily in manufacturing and capex.
“Thus, we expect Industrials, Materials, and Consumer Durables to continue their post-Covid outperformance. This should also lead to the small and mid-cap stocks outperforming as the manufacturing sector is more SMID-heavy,” he said in the note.
Sen, however, cautioned that the “extent of outperformance” may moderate a little a large part of the relative strength of manufacturing and SMID is reflected in the valuations.