Investor sentiment remains constructive with markets appearing “in a very good spot”, according to Dinshaw Irani, CEO, Helios Mutual Fund. Speaking to ET Now, he said the only major overhang for India had been elevated crude oil prices triggered by geopolitical tensions in the GCC region.
“I think things are looking pretty bright. The only overhang for India was obviously the runaway crude prices, thanks to what was happening in the GCC. By the way, one more thing I want to point out is I never wear this shirt very lightly with a bull on my chest as such. We are in for a good run in the markets,” he added.
He added that a resolution in global tensions could ease crude prices, which would significantly support India’s macro stability, especially the current account deficit.
Crude oil remains key macro trigger for India
Irani highlighted that India’s sensitivity to oil prices is high due to large import dependence.
“India has been obviously getting hit not only because of the crude prices being 5 million barrels a day of crude. So, any upsurge in that price really impacts our current account deficit, but we also getting hit on the FPI and FDI becoming almost zero now for us.”
However, he noted that corporate earnings have remained resilient despite macro pressures, surprising positively across segments.
Earnings surprise on the upside across midcaps and smallcaps
Contrary to earlier cautious expectations, earnings growth has come in stronger than anticipated, especially in broader markets.
“The quarterly numbers thus far has been very exciting. In fact, the midcaps have been outlier out here… the numbers are in the mid-20s, the earnings growth is in the mid-20s, same holds out for the smallcap universe. It is in the early 20s as such.”
He further noted that even after adjusting for companies moving from losses to profits, earnings trends remain healthy across the market.
Near-term pressure in Q1, but outlook improves beyond that
While the June quarter may reflect margin pressure due to crude and input costs, Irani expects recovery ahead.
“Obviously, the current quarter will be a trying one given that the crude impact will be felt the most in this quarter… But beyond that, you will see growth coming back to normal, earnings growth coming back to normal.”
He added that markets often discount such phases in advance, which may explain recent volatility.
Rally sustainability: short-term cost pressure vs long-term earnings strength
Addressing concerns on whether the rally is sustainable, he pointed out that Q4 earnings have already surprised positively.
“It has been a pretty healthy number which has come out for the current quarter… already quite a few has started passing the raw material hikes that they are seeing to the end consumer.”
He cited autos and oil & gas as sectors where price transmission has already begun. If this continues, earnings could surprise further on the upside.
Oil marketing companies: risk reduces, earnings may stabilise
On oil marketing companies, Irani noted that the worst may be behind them as price hikes have already been implemented.
“For them to breakeven, so basically now from a huge amount of loss, we are not seeing those kind of losses going forward.”
He added that if crude cools below key thresholds, profitability could improve further, though retail fuel prices typically do not reverse quickly.
Investment stance: selective buying after sharp corrections
On portfolio strategy, Irani said the focus is on opportunities where corrections have been excessive and not fundamentally justified.
“Wherever there have been sharp corrections for no reason, those are the sectors or rather stocks that we are picking up.”
He highlighted interest in new-age companies, discretionary consumption, and engineering/manufacturing-linked (EMS) space, where he believes the correction has been overdone.
Shift towards midcaps and smallcaps; IT remains avoided
He also confirmed a strategic tilt away from largecaps toward mid and smallcap exposure.
“We have moved into mid and smallcaps to an extent… because the growth rates from here on will be very exciting in this category rather than in the largecap space.”
On sector preference:
“It is mainly discretionary space, somewhat a capex space… IT is a total avoid for us even today.”
He warned that artificial intelligence-led disruption could pressure margins and growth in the IT sector going forward.
Outlook: growth cycle ahead if macros stabilise
Summing up the market view, Irani maintained that India is positioned for a strong phase ahead, provided crude stabilises and earnings momentum continues.
“We are in a very good spot today.”
