3 days ago
Selective Buying Favored as Oil and Hormuz Risks Persist
Vinod Nair says investors should buy Indian stocks carefully rather than broadly.
He sees attractive opportunities in some mid-sized and smaller companies.
The Sensex has fallen this year, although recent company earnings have been strong.
India’s economy grew faster than the Reserve Bank of India expected in the first quarter.
However, expensive oil and high global interest rates are creating problems.
A long disruption around the Strait of Hormuz could make oil prices rise further.
Higher oil prices could increase inflation and widen India’s current account deficit.
Some industries, such as airlines, tyre makers and paint companies, could suffer.
Oil producers could benefit, so investors need to choose stocks selectively.
Vinod Nair says India’s market offers selective opportunities, especially among mid- and small-cap stocks after recent consolidation.
The Sensex is down 10.25% year to date and 3.15% over the past month, despite gaining 3.66% in three months.
India’s one-year forward valuation has fallen to 17.9 times, about 10% below its five-year average, but remains expensive versus emerging-market peers.
Q1FY27 real GDP growth reached 7.8%, while manufacturing grew 9.2% and financial, real estate, IT and professional services grew 12.1%.
Persistent crude prices, elevated global yields and a possible prolonged Hormuz disruption could pressure earnings, valuations and the rupee.
- Who
- Vinod Nair, Head of Research at Geojit Investments Limited, and investors in Indian equities.
- What
- Nair advised selective stock buying while warning that oil prices, global yields and a possible Hormuz disruption could weaken India’s market outlook.
- Where
- India’s stock market, with risks linked to global crude oil markets and the Strait of Hormuz.
- When
- The assessment covers the 2025-26 market period, Q1FY27 results and the possible September Federal Reserve policy move.
- Why
- Robust domestic growth and earnings are being weighed against volatile crude prices, elevated global bond yields and potential supply-chain disruption.
Selective Opportunity
Macro Risk
Indian equity valuations
Selective Opportunity
The market’s one-year forward valuation has declined to 17.9 times, and recent earnings growth and strong GDP data support selective buying.
Macro Risk
India still trades at a large premium to global emerging-market peers, leaving valuations vulnerable to further compression if risks intensify.
Economic growth outlook
Selective Opportunity
Q1FY27 real GDP growth of 7.8%, strong manufacturing growth and expanding services provide a solid domestic foundation.
Macro Risk
Strong growth alone may not offset an escalating oil shock, supply-chain disruption or pressure on the rupee.
Oil and Hormuz exposure
Selective Opportunity
Upstream oil producers could benefit from higher crude prices, while the Samudra Manthan exploration scheme could support future domestic production.
Macro Risk
A prolonged Hormuz disruption could force earnings cuts and hurt paint makers, tyre manufacturers, aviation companies and oil marketing companies.
Key facts
- Sensex performance
- Down 10.25% year to date and 3.15% over the past month; up 3.66% over three months.
- Forward valuation
- India’s one-year forward valuation is 17.9 times, about 10% below its five-year average.
- Q1FY27 real GDP growth
- 7.8%, compared with the Reserve Bank of India’s 7.0% projection.
- Q1FY27 manufacturing growth
- 9.2%.
- Q1FY27 services growth
- Financial, real estate, IT and professional services grew 12.1%.
- Oil sensitivity
- Every $10-per-barrel increase in oil prices could widen India’s current account deficit by about 0.35% of GDP and raise inflation by 20–30 basis points.
- Market opportunity
- Nair identified selective opportunities in mid- and small-cap stocks after their consolidation during 2025-26.
Sources
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