Market on the back foot, opportunities ahead: where should investors put their money?
With oil prices, geopolitical tensions and FPI outflows weighing on Dalal Street, Bajaj Capital’s Souvik Biswas explains why this is a stock-picker’s market, and where investors can find value.
- Oct 9, 2026,
- Updated Oct 9, 2026 5:46 PM IST
The BSE Sensex and the NSE Nifty 50 rebounded by around 1% on Friday, ending their longest weekly losing streak in 25 years. However, India’s stock markets are still among the worst performers this year. The Sensex is down nearly 15% year to date, and the Nifty has shed 14%, compared with a 13% rise in the S&P 500 and a 33% jump in Japan’s Nikkei 225.
Souvik Biswas, head of research at Bajaj Capital, says the market is in “risk-off” mode. While corporate earnings may still be holding up, global geopolitical tensions and AI-led disruptions will continue to weigh on investor sentiment.
“It is well understood that external conditions—primarily oil and global yield pressures, foreign portfolio investor (FPI) selling, and rupee weakness—have contributed to this. It must also be accepted that India’s susceptibility to global issues has been brutally exposed, especially in an AI-led disruptive world in which India is yet to establish a presence,” Biswas told Business Today.
With signs of a truce between the US and Iran still elusive, crude oil prices have risen again in recent weeks, putting pressure on the government’s finances. Furthermore, bond yields have surged in the US, adding to the pressure and leading to more outflows from India’s equity market. FPIs have offloaded equities worth Rs 31,282 crore this month alone, as of October 8. Outflows between January and October have topped Rs 2.91 lakh crore.
Biswas does not expect any “dramatic resetting of expectations” and, therefore, believes that any major improvement this year is unlikely. According to him, the only positives that could emerge for equity markets are a potential stabilisation of the US-Iran conflict and related energy issues, as well as the outcome of the upcoming midterm elections.
“Stability in global conditions is a precondition for a structural improvement in Indian markets. Geopolitical and AI-led disruptions, along with higher global yields, are key risks to the India story, balanced by a degree of domestic resilience and opportunities in new-age sectors and exports,” Biswas stressed.
According to Biswas, this remains a stock-picker’s market. Some segments remain attractive, including manufacturing, healthcare, and renewables, where capital expenditure, earnings visibility, and growth potential are evident, he pointed out.
The underperformance of India’s equity market now stretches back two years. In such a scenario, what is his advice for retail investors, particularly those who have been investing regularly through SIPs?
“We advise a portfolio approach to investing rather than a product-based way of thinking. This is a time to be selective about the risks an investor includes in the portfolio,” Biswas said. Investors can also consider hybrid products and arbitrage-type funds for additional protection, he added.
He expects any turnaround in the markets to be led by the mid-cap and small-cap segments. However, investors positioning themselves in these segments should also be mindful of valuations.
“Traditionally, the large-cap segment has a lower but more predictable earnings profile. The current macroeconomic scenario affects that predictability to a large extent,” Biswas noted.
In addition to being affected by the overall negative macroeconomic environment, the large-cap segment has suffered because some of its most heavily weighted sectors—including IT, oil marketing companies, and banks—have been among the worst performers, he pointed out.
“Valuation comfort is greatest in the large-cap segment. However, when viewed in relation to growth potential, the mid-cap and small-cap segments also appear quite reasonable. Near-term uncertainty remains, and unless energy prices stabilise to some degree, we think this will continue,” he added.
Biswas also believes that conservative investors should view bonds as a source of fixed income and lock in higher yields at this stage of the market cycle. However, he notes that investors must keep in mind the limited liquidity in the secondary bond market.
“Bonds are best suited to conservative investors as a key source of regular income, especially when held until maturity,” Biswas stated.
His advice is that conservative investors can access higher-yielding AA-rated issues without taking on outsized risks. In any case, they should not invest in issues rated below A+.
The BSE Sensex and the NSE Nifty 50 rebounded by around 1% on Friday, ending their longest weekly losing streak in 25 years. However, India’s stock markets are still among the worst performers this year. The Sensex is down nearly 15% year to date, and the Nifty has shed 14%, compared with a 13% rise in the S&P 500 and a 33% jump in Japan’s Nikkei 225.
Souvik Biswas, head of research at Bajaj Capital, says the market is in “risk-off” mode. While corporate earnings may still be holding up, global geopolitical tensions and AI-led disruptions will continue to weigh on investor sentiment.
“It is well understood that external conditions—primarily oil and global yield pressures, foreign portfolio investor (FPI) selling, and rupee weakness—have contributed to this. It must also be accepted that India’s susceptibility to global issues has been brutally exposed, especially in an AI-led disruptive world in which India is yet to establish a presence,” Biswas told Business Today.
With signs of a truce between the US and Iran still elusive, crude oil prices have risen again in recent weeks, putting pressure on the government’s finances. Furthermore, bond yields have surged in the US, adding to the pressure and leading to more outflows from India’s equity market. FPIs have offloaded equities worth Rs 31,282 crore this month alone, as of October 8. Outflows between January and October have topped Rs 2.91 lakh crore.
Biswas does not expect any “dramatic resetting of expectations” and, therefore, believes that any major improvement this year is unlikely. According to him, the only positives that could emerge for equity markets are a potential stabilisation of the US-Iran conflict and related energy issues, as well as the outcome of the upcoming midterm elections.
“Stability in global conditions is a precondition for a structural improvement in Indian markets. Geopolitical and AI-led disruptions, along with higher global yields, are key risks to the India story, balanced by a degree of domestic resilience and opportunities in new-age sectors and exports,” Biswas stressed.
According to Biswas, this remains a stock-picker’s market. Some segments remain attractive, including manufacturing, healthcare, and renewables, where capital expenditure, earnings visibility, and growth potential are evident, he pointed out.
The underperformance of India’s equity market now stretches back two years. In such a scenario, what is his advice for retail investors, particularly those who have been investing regularly through SIPs?
“We advise a portfolio approach to investing rather than a product-based way of thinking. This is a time to be selective about the risks an investor includes in the portfolio,” Biswas said. Investors can also consider hybrid products and arbitrage-type funds for additional protection, he added.
He expects any turnaround in the markets to be led by the mid-cap and small-cap segments. However, investors positioning themselves in these segments should also be mindful of valuations.
“Traditionally, the large-cap segment has a lower but more predictable earnings profile. The current macroeconomic scenario affects that predictability to a large extent,” Biswas noted.
In addition to being affected by the overall negative macroeconomic environment, the large-cap segment has suffered because some of its most heavily weighted sectors—including IT, oil marketing companies, and banks—have been among the worst performers, he pointed out.
“Valuation comfort is greatest in the large-cap segment. However, when viewed in relation to growth potential, the mid-cap and small-cap segments also appear quite reasonable. Near-term uncertainty remains, and unless energy prices stabilise to some degree, we think this will continue,” he added.
Biswas also believes that conservative investors should view bonds as a source of fixed income and lock in higher yields at this stage of the market cycle. However, he notes that investors must keep in mind the limited liquidity in the secondary bond market.
“Bonds are best suited to conservative investors as a key source of regular income, especially when held until maturity,” Biswas stated.
His advice is that conservative investors can access higher-yielding AA-rated issues without taking on outsized risks. In any case, they should not invest in issues rated below A+.