Markets attractive but risks remain; buy on dips, stay selective: Geojit’s Vinod Nair
Indian equities have corrected to more reasonable levels but near-term risks from geopolitical tensions and elevated crude prices persist, says Vinod Nair, Head of Research at Geojit Investments.
- Apr 3, 2026,
- Updated Apr 3, 2026 12:10 PM IST
Indian equities have corrected to more reasonable levels, trading about 15 per cent below their five-year average, but near-term risks from geopolitical tensions and elevated crude prices persist, believes Vinod Nair, Head of Research at Geojit Investments. He remains cautious on mid- and small-caps despite improved valuations, citing continued premium levels and earnings risks.
He sees Q4 earnings to be stable, led by sectors like defence, infrastructure and auto, while IT and pharma may stay muted. Nair advises long-term investors to accumulate on dips, with selective opportunities in IT, banking, and manufacturing, while IPO activity may moderate but remain healthy for quality issuers. Read the edited excerpts:
BT: Indian equities have seen a sharp correction amid geopolitical tensions and global volatility. Do you believe the recent decline has made valuations attractive enough for fresh allocations, or is there room for further downside?
Nair: India’s market valuations have corrected and are now trading at around 15% below the five-year average, which could attract deep-value buying as crude prices stabilize.However, near-term risks remain elevated due to the prolonged Middle East conflict, the potential next phase of U.S. offensives, and Iran’s likely response. These factors may keep crude prices elevated and could result in further earnings downgrades, thereby increasing near-term downside risk for the market.
BT: Midcap and smallcap stocks have corrected more sharply than large caps. Do you see this as a healthy consolidation after the strong rally of the past two years, or are valuations in the broader market still stretched?
Nair: The sharp correction in mid- and small-cap stocks reflects increased FII selling, a slowdown in domestic buying amid the global sell-off, and the risk of future earnings downgrades. While the recent price correction has improved valuations, we remain highly stock-selective, as broader mid-cap valuations continue to trade above long-term averages. With mid-caps still commanding a premium over large caps, the risk of near- to medium-term underperformance remains elevated.
BT: As the March-quarter earnings season approaches, what are your expectations for Q4 results? Which sectors are likely to outperform, and where do you see risks of earnings disappointments? How do you see India Inc.’s earnings growth shaping up in FY27?
Nair: March-quarter performance was likely to be marginally better on a QoQ basis, supported by higher government spending and improved customer demand. As a result, sectors such as Defence, Infrastructure, Capital Goods, Consumer, and Auto are expected to perform well. Metals should also see strength, aided by favourable international prices and supportive government measures, including customs duty and anti-dumping policies. However, the lagged impact of crude prices on the broader economy may weigh on sectors like energy and chemicals in Q4, also raising concerns about spillover effects on Q1 FY27 in the economy and overall FY27 EPS growth thus distracting from the actual performance. Additionally, outlook for some sectors like IT, Pharma, Energy and Finance are muted due to cyclical slowdowns.
BT: In the current environment, which sectors or themes appear best placed from a risk-reward perspective over the next 12–18 months?
Nair: The IT sector is trading at a deep discount, offering an attractive long-term value-buy opportunity, even though the near-term quarterly outlook remains subdued and consolidation may persist. Banking stocks are also available at attractive valuations; however, near-term challenges such as regulatory tightening, rural stress, and deposit slowdown could pressure NIMs and balance-sheet quality. Manufacturing and capital goods remain promising themes—valuations are still elevated but are correcting meaningfully. Consumption-oriented sectors such as Auto and FMCG also offer investment opportunities. We remain positive on Power and Metals, supported by stable demand and favourable policy tailwinds.
BT: The IPO pipeline remains strong, but secondary market volatility has weighed on listings. Do you expect IPO activity to slow in the near term, or will quality issuances continue to see healthy investor demand?
Nair: We expect the IPO market to moderate during the year, particularly in the mid- and small-sized issue segment, amid weaker investor appetite for mid-caps and a sharp correction in forward valuations, which will reduce the pricing power of promoters and venture capital investors, thus reducing offerings. However, overall sentiment remains positive and should support new-age companies and strong business models. High-quality IPOs are likely to continue and may still offer listing gains attracting investors.
BT: Given the current volatility, what should be the ideal strategy for long-term investors—accumulate on dips, stay defensive, or wait for more clarity on global developments?
Nair: The ongoing sell-off is primarily driven by the Middle East conflict, which is widely viewed as short-lived and therefore likely to see its impact reverse over the course of the year. Accumulation remains a prudent strategy for long-term positions and averaging portfolio costs with the objective on long-term wealth creation. While buying at dip will stay are the crux of a short-term investors with an eye on crude and currency trends.
Indian equities have corrected to more reasonable levels, trading about 15 per cent below their five-year average, but near-term risks from geopolitical tensions and elevated crude prices persist, believes Vinod Nair, Head of Research at Geojit Investments. He remains cautious on mid- and small-caps despite improved valuations, citing continued premium levels and earnings risks.
He sees Q4 earnings to be stable, led by sectors like defence, infrastructure and auto, while IT and pharma may stay muted. Nair advises long-term investors to accumulate on dips, with selective opportunities in IT, banking, and manufacturing, while IPO activity may moderate but remain healthy for quality issuers. Read the edited excerpts:
BT: Indian equities have seen a sharp correction amid geopolitical tensions and global volatility. Do you believe the recent decline has made valuations attractive enough for fresh allocations, or is there room for further downside?
Nair: India’s market valuations have corrected and are now trading at around 15% below the five-year average, which could attract deep-value buying as crude prices stabilize.However, near-term risks remain elevated due to the prolonged Middle East conflict, the potential next phase of U.S. offensives, and Iran’s likely response. These factors may keep crude prices elevated and could result in further earnings downgrades, thereby increasing near-term downside risk for the market.
BT: Midcap and smallcap stocks have corrected more sharply than large caps. Do you see this as a healthy consolidation after the strong rally of the past two years, or are valuations in the broader market still stretched?
Nair: The sharp correction in mid- and small-cap stocks reflects increased FII selling, a slowdown in domestic buying amid the global sell-off, and the risk of future earnings downgrades. While the recent price correction has improved valuations, we remain highly stock-selective, as broader mid-cap valuations continue to trade above long-term averages. With mid-caps still commanding a premium over large caps, the risk of near- to medium-term underperformance remains elevated.
BT: As the March-quarter earnings season approaches, what are your expectations for Q4 results? Which sectors are likely to outperform, and where do you see risks of earnings disappointments? How do you see India Inc.’s earnings growth shaping up in FY27?
Nair: March-quarter performance was likely to be marginally better on a QoQ basis, supported by higher government spending and improved customer demand. As a result, sectors such as Defence, Infrastructure, Capital Goods, Consumer, and Auto are expected to perform well. Metals should also see strength, aided by favourable international prices and supportive government measures, including customs duty and anti-dumping policies. However, the lagged impact of crude prices on the broader economy may weigh on sectors like energy and chemicals in Q4, also raising concerns about spillover effects on Q1 FY27 in the economy and overall FY27 EPS growth thus distracting from the actual performance. Additionally, outlook for some sectors like IT, Pharma, Energy and Finance are muted due to cyclical slowdowns.
BT: In the current environment, which sectors or themes appear best placed from a risk-reward perspective over the next 12–18 months?
Nair: The IT sector is trading at a deep discount, offering an attractive long-term value-buy opportunity, even though the near-term quarterly outlook remains subdued and consolidation may persist. Banking stocks are also available at attractive valuations; however, near-term challenges such as regulatory tightening, rural stress, and deposit slowdown could pressure NIMs and balance-sheet quality. Manufacturing and capital goods remain promising themes—valuations are still elevated but are correcting meaningfully. Consumption-oriented sectors such as Auto and FMCG also offer investment opportunities. We remain positive on Power and Metals, supported by stable demand and favourable policy tailwinds.
BT: The IPO pipeline remains strong, but secondary market volatility has weighed on listings. Do you expect IPO activity to slow in the near term, or will quality issuances continue to see healthy investor demand?
Nair: We expect the IPO market to moderate during the year, particularly in the mid- and small-sized issue segment, amid weaker investor appetite for mid-caps and a sharp correction in forward valuations, which will reduce the pricing power of promoters and venture capital investors, thus reducing offerings. However, overall sentiment remains positive and should support new-age companies and strong business models. High-quality IPOs are likely to continue and may still offer listing gains attracting investors.
BT: Given the current volatility, what should be the ideal strategy for long-term investors—accumulate on dips, stay defensive, or wait for more clarity on global developments?
Nair: The ongoing sell-off is primarily driven by the Middle East conflict, which is widely viewed as short-lived and therefore likely to see its impact reverse over the course of the year. Accumulation remains a prudent strategy for long-term positions and averaging portfolio costs with the objective on long-term wealth creation. While buying at dip will stay are the crux of a short-term investors with an eye on crude and currency trends.