Adopt 70-20-10 portfolio strategy amid geopolitical risks: Ankur Jhaveri of JM Financial
Indian equity markets are likely to remain volatile in the near term due to geopolitical tensions in West Asia, elevated US bond yields, said Ankur Jhaveri, MD & CEO of Institutional Equities at JM Financial.
- Mar 27, 2026,
- Updated Mar 27, 2026 2:22 PM IST
Indian equity markets are likely to remain volatile in the near term due to geopolitical tensions in West Asia, elevated US bond yields, and risks to oil supply through the Strait of Hormuz, said Ankur Jhaveri, MD & CEO of Institutional Equities at JM Financial Ltd. He believes that sustained crude prices above $100 per barrel could pressure corporate margins, inflation, and GDP growth, while also weakening the rupee and triggering foreign investor outflows.
Jhaveri advises investors to remain cautious and tilt portfolios toward large caps and domestic-demand sectors such as financials, power, defence, and infrastructure, while avoiding export-oriented and crude-sensitive industries. Read the edited excerpts:
BT: Following the pause by the US, how do you see the ongoing West Asia war crisis impacting Indian equity markets in the near term, particularly ahead of Q4 results? Do you expect the volatility to persist or stabilise soon?
Jhaveri: The current five-day pause in U.S. military actions has offered a momentary reprieve, yet markets remain rightfully sceptical. With U.S. Treasury yields hovering at an elevated 4.35% and the India VIX reaching 24.5, levels not seen since the 2024 General Election, volatility is currently the dominant driver over fundamental earnings.
Our immediate concern remains the Strait of Hormuz (SoH). As a critical artery for India’s energy needs, any prolonged closure inflicts direct pain on our Balance of Payments and currency. Consequently, we expect FIIs to remain in a "risk-off" mode, reducing EM exposure until a clear maritime resolution emerges.
However, our strategic outlook remains constructive. While the market is currently reacting to geopolitical movements, diplomatic backchannels are actively working toward de-escalation. We expect these productive talks to eventually stabilize the sentiment.
In the near term, we are bracing for earnings cuts as Q4 results grapple with these macro disruptions. Investors should view this as a period of transition; we expect the market to remain volatile as it cushions these shocks, eventually pivoting toward FY27 as a breakout, earnings-driven year. Our focus remains on resilience today to capture the fundamental growth of tomorrow.
BT. If crude oil prices sustain above key levels due to geopolitical tensions, what could be the implications for India’s inflation outlook, corporate margins and the broader stock market?
Jhaveri: With Brent crude breaching $100/bbl for the fourth time in 25 years, we are monitoring the structural shift in India’s energy resilience. Historically, such spikes severely pressured our Trade Deficit and GDP growth. However, India’s vulnerability has decoupled significantly over the last decade; oil imports as a percentage of GDP have halved, from 8.9% in 2013 to approximately 4.3% today.
While the government typically cushions consumers from immediate pump-price volatility, a sustained period (over one quarter) above $100/bbl could shave 0.5ppt off GDP growth. For the stock market, the primary risk is a squeeze on corporate margins, particularly in energy-sensitive sectors. This may lead to near-term pressure on earnings multiples as input costs rise.
Unlike previous cycles, India is now aggressively hedging through alternative energy and significant investments in tech transfer. While we anticipate near-term earnings cuts, this pressure is accelerating Capex into efficiency and renewable.
In the mid-term, we expect a realignment as supply chain bottlenecks are mitigated. The underlying demand-led growth remains a powerful undercurrent, and we believe the shift toward energy independence will eventually buffer the traditional "oil-shock" narrative for Indian equities. We are transitioning from a period of vulnerability to one of structural adaptation.
BT: With rising geopolitical risks and possible capital outflows, how vulnerable is the Indian rupee, and what impact could further depreciation have on equities and foreign investor sentiment?
Jhaveri: The Indian Rupee has faced significant pressure in 2026, depreciating 4.26%, well above the 3% historical annual average. This decline directly reflects the geopolitical risk premium currently assigned to emerging markets due to their energy dependency on the Strait of Hormuz. We have seen intense FII selling to the tune of $12.5 billion in the first 24 days of March alone, surpassing the outflows of late 2024. Until the Strait reopens, macro variables including the Balance of Payments and currency stability will remain under duress across the EM region. However, Rupee and the markets are inherently forward-looking. While financials are currently under pressure, active diplomatic dialogues are undergoing to add a necessary cushion to our macro framework. We recognize that the return of FIIs will take time, as emerging markets are disproportionately exposed to these global shocks. A sustainable reversal in sentiment depends on the market stabilizing and shifting its focus back to fundamental, earnings-driven growth. We are navigating this period by focusing on these underlying strengths, anticipating that once the geopolitical fog clears, India’s domestic earnings trajectory will once again become the primary magnet for foreign capital.
BT: After the recent correction in broader markets, especially mid- and small-caps, do you believe valuations have become attractive or is further downside likely?
Jhaveri: The recent correction across the broader markets, while significant, has not yet rendered valuations reasonable across the board. Small-caps have faced the steepest decline at 16%, compared to 11% in large-caps and 9% in mid-caps from their recent peaks. Despite this drawdown, we remain cautious of the second-order effects of the Middle East conflict. An extended oil shock could severely impact the growth and inflation profiles of smaller companies, which typically have less balance sheet resilience than their larger peers. Therefore, while the correction has removed some froth, the short-term risk to the small- and mid-cap space remains elevated.
From a strategic standpoint, while volatility is high, we believe targeted opportunities still exist for the discerning investor. Our current portfolio strategy remains tilted toward large-cap names that have proven their resilience over multiple cycles. We are maintaining a lower allocation to small- and mid-cap segments until we see a clearer stabilization in macro variables. We view certain pockets as becoming attractive, but we are prioritizing quality and liquidity to navigate this period of uncertainty. Our goal is to protect capital while positioning ourselves to capture the eventual pivot back to earnings-driven growth.
BT: Which sectors in the Indian market are likely to outperform or remain resilient if geopolitical tensions escalate and crude prices remain elevated? Which sectors look attractive to you?
Jhaveri: In navigating the current geopolitical climate, we must account for both direct and secondary impacts of an extended oil shock. While the fallout of Brent crude breaching $100/bbl is broad-based, companies catering to domestic demand remain structurally cushioned from external disruptions. We are strategically avoiding export-oriented sectors, Oil Marketing Companies, and crude-dependent industries like paints and chemicals, where margin compression is most acute. Instead, our conviction lies in sectors with lower price elasticity and robust domestic drivers.
From a strategic perspective, we are tilting our focus toward second-order sectors such as financials, power, and utilities. Private banks, in particular, are trading at reasonable valuations and possess the balance sheet strength to weather macro volatility. Furthermore, we see significant resilience in discretionary consumption, where pricing power remains intact despite inflationary pressures. Other defensive moats include the defence, cement, and infrastructure sectors, which benefit from long-term domestic capex cycles and are less sensitive to immediate global trade fluctuations. While we anticipate near-term earnings pressure across the manufacturing landscape, these specific pockets offer a blend of valuation comfort and structural growth. By prioritizing sectors with localized demand and essential utility, we are positioning to outperform as the market recalibrates. This approach ensures we remain anchored in India’s internal growth story while global supply chains remain under duress.
BT: In the current environment of global uncertainty, what strategy should investors adopt — defensive positioning, selective buying on dips, or staying cautious until macro clarity emerges? What are your top picks in these volatile times?
Jhaveri: In the current landscape of global uncertainty, a macro-cautious approach is warranted, particularly for the emerging market basket. Until the Strait of Hormuz reopens and geopolitical tensions subside, we recommend a defensive posture focused on low-beta sectors and market leaders with minimal external exposure. However, the objective is not to chase every cycle, but to compound quietly across them. We advocate for a disciplined 70-20-10 asset allocation rule to manage risk while staying positioned for growth.
The Core (70%) bucket should focus on stable, long-term wealth creators. Equities remains the primary engine here, but volatility should be countered through diversification into Flexi-cap funds, REITs, and ETFs. The Growth (20%) bucket allows for capturing early trends through unlisted equity, PE funds, or thematic small-caps where risk is higher but returns can be enhanced. Finally, the Aggressive (10%) bucket is for "blue sky" experiments in emerging assets like new-age art or crypto, which should never influence your core portfolio decisions.
Crucially, investors should leverage the Liberalised Remittance Scheme (LRS) to diversify into global markets, providing an essential currency hedge and domestic risk offset. Avoid excessive leveraging and stick to long-term goals through professional vehicles like Flexi-funds. By maintaining this structured balance and understanding the tax implications of each layer, investors can navigate today’s volatile market movements without compromising their financial foundation. Prudence today ensures the ability to participate in the earnings-driven recovery we anticipate for FY27.
Indian equity markets are likely to remain volatile in the near term due to geopolitical tensions in West Asia, elevated US bond yields, and risks to oil supply through the Strait of Hormuz, said Ankur Jhaveri, MD & CEO of Institutional Equities at JM Financial Ltd. He believes that sustained crude prices above $100 per barrel could pressure corporate margins, inflation, and GDP growth, while also weakening the rupee and triggering foreign investor outflows.
Jhaveri advises investors to remain cautious and tilt portfolios toward large caps and domestic-demand sectors such as financials, power, defence, and infrastructure, while avoiding export-oriented and crude-sensitive industries. Read the edited excerpts:
BT: Following the pause by the US, how do you see the ongoing West Asia war crisis impacting Indian equity markets in the near term, particularly ahead of Q4 results? Do you expect the volatility to persist or stabilise soon?
Jhaveri: The current five-day pause in U.S. military actions has offered a momentary reprieve, yet markets remain rightfully sceptical. With U.S. Treasury yields hovering at an elevated 4.35% and the India VIX reaching 24.5, levels not seen since the 2024 General Election, volatility is currently the dominant driver over fundamental earnings.
Our immediate concern remains the Strait of Hormuz (SoH). As a critical artery for India’s energy needs, any prolonged closure inflicts direct pain on our Balance of Payments and currency. Consequently, we expect FIIs to remain in a "risk-off" mode, reducing EM exposure until a clear maritime resolution emerges.
However, our strategic outlook remains constructive. While the market is currently reacting to geopolitical movements, diplomatic backchannels are actively working toward de-escalation. We expect these productive talks to eventually stabilize the sentiment.
In the near term, we are bracing for earnings cuts as Q4 results grapple with these macro disruptions. Investors should view this as a period of transition; we expect the market to remain volatile as it cushions these shocks, eventually pivoting toward FY27 as a breakout, earnings-driven year. Our focus remains on resilience today to capture the fundamental growth of tomorrow.
BT. If crude oil prices sustain above key levels due to geopolitical tensions, what could be the implications for India’s inflation outlook, corporate margins and the broader stock market?
Jhaveri: With Brent crude breaching $100/bbl for the fourth time in 25 years, we are monitoring the structural shift in India’s energy resilience. Historically, such spikes severely pressured our Trade Deficit and GDP growth. However, India’s vulnerability has decoupled significantly over the last decade; oil imports as a percentage of GDP have halved, from 8.9% in 2013 to approximately 4.3% today.
While the government typically cushions consumers from immediate pump-price volatility, a sustained period (over one quarter) above $100/bbl could shave 0.5ppt off GDP growth. For the stock market, the primary risk is a squeeze on corporate margins, particularly in energy-sensitive sectors. This may lead to near-term pressure on earnings multiples as input costs rise.
Unlike previous cycles, India is now aggressively hedging through alternative energy and significant investments in tech transfer. While we anticipate near-term earnings cuts, this pressure is accelerating Capex into efficiency and renewable.
In the mid-term, we expect a realignment as supply chain bottlenecks are mitigated. The underlying demand-led growth remains a powerful undercurrent, and we believe the shift toward energy independence will eventually buffer the traditional "oil-shock" narrative for Indian equities. We are transitioning from a period of vulnerability to one of structural adaptation.
BT: With rising geopolitical risks and possible capital outflows, how vulnerable is the Indian rupee, and what impact could further depreciation have on equities and foreign investor sentiment?
Jhaveri: The Indian Rupee has faced significant pressure in 2026, depreciating 4.26%, well above the 3% historical annual average. This decline directly reflects the geopolitical risk premium currently assigned to emerging markets due to their energy dependency on the Strait of Hormuz. We have seen intense FII selling to the tune of $12.5 billion in the first 24 days of March alone, surpassing the outflows of late 2024. Until the Strait reopens, macro variables including the Balance of Payments and currency stability will remain under duress across the EM region. However, Rupee and the markets are inherently forward-looking. While financials are currently under pressure, active diplomatic dialogues are undergoing to add a necessary cushion to our macro framework. We recognize that the return of FIIs will take time, as emerging markets are disproportionately exposed to these global shocks. A sustainable reversal in sentiment depends on the market stabilizing and shifting its focus back to fundamental, earnings-driven growth. We are navigating this period by focusing on these underlying strengths, anticipating that once the geopolitical fog clears, India’s domestic earnings trajectory will once again become the primary magnet for foreign capital.
BT: After the recent correction in broader markets, especially mid- and small-caps, do you believe valuations have become attractive or is further downside likely?
Jhaveri: The recent correction across the broader markets, while significant, has not yet rendered valuations reasonable across the board. Small-caps have faced the steepest decline at 16%, compared to 11% in large-caps and 9% in mid-caps from their recent peaks. Despite this drawdown, we remain cautious of the second-order effects of the Middle East conflict. An extended oil shock could severely impact the growth and inflation profiles of smaller companies, which typically have less balance sheet resilience than their larger peers. Therefore, while the correction has removed some froth, the short-term risk to the small- and mid-cap space remains elevated.
From a strategic standpoint, while volatility is high, we believe targeted opportunities still exist for the discerning investor. Our current portfolio strategy remains tilted toward large-cap names that have proven their resilience over multiple cycles. We are maintaining a lower allocation to small- and mid-cap segments until we see a clearer stabilization in macro variables. We view certain pockets as becoming attractive, but we are prioritizing quality and liquidity to navigate this period of uncertainty. Our goal is to protect capital while positioning ourselves to capture the eventual pivot back to earnings-driven growth.
BT: Which sectors in the Indian market are likely to outperform or remain resilient if geopolitical tensions escalate and crude prices remain elevated? Which sectors look attractive to you?
Jhaveri: In navigating the current geopolitical climate, we must account for both direct and secondary impacts of an extended oil shock. While the fallout of Brent crude breaching $100/bbl is broad-based, companies catering to domestic demand remain structurally cushioned from external disruptions. We are strategically avoiding export-oriented sectors, Oil Marketing Companies, and crude-dependent industries like paints and chemicals, where margin compression is most acute. Instead, our conviction lies in sectors with lower price elasticity and robust domestic drivers.
From a strategic perspective, we are tilting our focus toward second-order sectors such as financials, power, and utilities. Private banks, in particular, are trading at reasonable valuations and possess the balance sheet strength to weather macro volatility. Furthermore, we see significant resilience in discretionary consumption, where pricing power remains intact despite inflationary pressures. Other defensive moats include the defence, cement, and infrastructure sectors, which benefit from long-term domestic capex cycles and are less sensitive to immediate global trade fluctuations. While we anticipate near-term earnings pressure across the manufacturing landscape, these specific pockets offer a blend of valuation comfort and structural growth. By prioritizing sectors with localized demand and essential utility, we are positioning to outperform as the market recalibrates. This approach ensures we remain anchored in India’s internal growth story while global supply chains remain under duress.
BT: In the current environment of global uncertainty, what strategy should investors adopt — defensive positioning, selective buying on dips, or staying cautious until macro clarity emerges? What are your top picks in these volatile times?
Jhaveri: In the current landscape of global uncertainty, a macro-cautious approach is warranted, particularly for the emerging market basket. Until the Strait of Hormuz reopens and geopolitical tensions subside, we recommend a defensive posture focused on low-beta sectors and market leaders with minimal external exposure. However, the objective is not to chase every cycle, but to compound quietly across them. We advocate for a disciplined 70-20-10 asset allocation rule to manage risk while staying positioned for growth.
The Core (70%) bucket should focus on stable, long-term wealth creators. Equities remains the primary engine here, but volatility should be countered through diversification into Flexi-cap funds, REITs, and ETFs. The Growth (20%) bucket allows for capturing early trends through unlisted equity, PE funds, or thematic small-caps where risk is higher but returns can be enhanced. Finally, the Aggressive (10%) bucket is for "blue sky" experiments in emerging assets like new-age art or crypto, which should never influence your core portfolio decisions.
Crucially, investors should leverage the Liberalised Remittance Scheme (LRS) to diversify into global markets, providing an essential currency hedge and domestic risk offset. Avoid excessive leveraging and stick to long-term goals through professional vehicles like Flexi-funds. By maintaining this structured balance and understanding the tax implications of each layer, investors can navigate today’s volatile market movements without compromising their financial foundation. Prudence today ensures the ability to participate in the earnings-driven recovery we anticipate for FY27.