Speaking to ET Now during the volatile trading session, Anand Tandon, independent analyst, sounded a note of caution, arguing that the current correction, while uncomfortable, is not disruptive.
“I would call the odd 1% decline in the market because we are in geopolitics and our earnings growth relative to value,” Tandon said, adding that Indian equities remain the most expensive in the emerging market basket.
He noted that even without the escalation of tensions in the Middle East, domestic markets are trading at broad valuations relative to growth prospects. “If you look at emerging markets in general, you’re looking at markets that are likely to grow over 20% in earnings and trade at two-thirds of the value that we’re in,” he said.
According to Tandon, India’s growth may pick up slightly this year compared to last year – but that optimism depends on geopolitical stability. Against such a backdrop, he sees little merit in aggressive deep buying. “I don’t think there is any reason to rush out and buy,” he said, advising investors to focus on fundamentally sound stocks that have corrected meaningfully and wait patiently for attractive entry points.
Banking: Selective exposure is preferred
In the banking space, especially public sector banks, Tandon acknowledged that valuations look reasonable and balance sheets are cleaner than before. However, he identified a potential risk as the credit cycle gathers pace.
“Credit growth has started again and companies have started to go out there and borrow, which means there is a great opportunity to build crap portfolios – and I choose my words carefully,” he said, stressing the need for prudence in fresh lending. While making an exception for SBI, citing its strong credit history, he advised investors to proceed with caution. “If you have to be in banking, which is what I would recommend people continue to do, you should probably be in the middle of the big banks in the private sector and the public sector,” he said.
Engineering vs. Aviation: Clear Preference
When asked to choose between aviation and engineering, Tandon was undecided. “If the choice was between aviation and engineering, I would always prefer engineering,” he said.
While admitting that Larsen and Toubro aren’t cheap, he believes that any meaningful reform could present a buying opportunity, especially if the company’s access to conflict-ridden areas. “These are not companies you get on the cheap,” he noted, adding that near-term execution challenges or declining earnings should not overshadow long-term strength.
About the flight, he remained unconvinced. “I have never been able to convince myself that aviation is something that is capable of being profitable over a sustained period of time,” he said.
Auto and Assistant: Look beyond the obvious
Despite strong February numbers and strong management comments, auto stocks were among the worst hit in the session. Tandon attributed part of the weakness to heavy ownership in the sector.
“The numbers are going well and most of the management comments seem to be that the order books are very strong,” he said, suggesting that domestic demand remains healthy.
However, he encouraged investors to look beyond top-line automakers. “Maybe there are other ways to play this game besides auto, which are auto’s assistants,” he said, suggesting companies that are immune to technological disruption and those with global exposure.
IT: No immediate triggers
On IT, Tandon gave a clear assessment. “By and large, I don’t see any reason for me to be in IT at this point,” he said.
He believes that investors should first evaluate the long-term implications of artificial intelligence before investing in the sector. “We need to put the technology in place and see AI able to take over things,” he said.
With domestic employment trends flat to negative, he sees little evidence of near-term momentum. He added: “We’ve had zero-to-negative IT hiring in the domestic sector this year, and I think that speaks for itself.”
Geopolitical Wildcards
In the wider geopolitical shock, Tandon refrained from making bold predictions. He said: “Obviously two options – one is that the Iranian regime collapses immediately, in which case obviously everything can go up. On the other hand, you can have a missile go from Iran and hit a major US platform and then you have a problem.”
Finally, he acknowledged that predicting outcomes in such an environment is futile. “Your guess is as good as mine, I don’t think there’s an answer anyone can.”
For investors navigating the crosscurrents of valuation concerns, sector rotations and geopolitical risks, the takeaway seems clear: discipline, patience and choice are more important than bravado.
