West Asia War: Here are the sectors Alchemy Capital’s Alok Agarwal is looking at in the Indian market

Equity market investors have had a roller-coaster ride as a result of the war in West Asia, which has sent oil prices soaring and the rupee tumbling, raising concerns on India’s economy. While there are near-term challenges, fund managers remain positive looking beyond the conflict. 

Alok Agarwal, head of quant and fund manager at Alchemy Capital, pointed that India is in a growth phase and we are in a cycle where the corporate earnings to GDP ratio have been improving. 

“So, if nominal GDP grows at double-digit, and if corporate earnings can grow a couple of percentage points higher than that, then there is no reason why indices may not deliver low-teens returns,” Agarwal told BT.

Stocks have taken a knock amid uncertainties fuelled by the Israel-US attack on Iran. Foreign institutional investors have been selling massively, worried over the adverse impact the conflict in energy rich West Asia will have on India, which is dependent on imports to meet a large portion of its oil and gas requirement. Till March 18 this year, FPIs have offloaded over Rs 90,500 crore from India’s equity market. This is in addition to the Rs 1.66 lakh crore pulled out in 2025, due to the US-tariff related uncertainties and high valuations. 

Indian market had already been an underperformer to many other developed and emerging markets in 2025. Year-to-date in 2026 the BSE Sensex is down 10 per cent. Small- and mid-cap stocks too have seen sizeable correction this year. 

In a war “risk-on” sentiments take a knock globally, leading to corrections, but historically we have seen that once these things get over, over a few months to a year down the line, the bounce back can be equally good, Agarwal pointed.

“Historically; these kinds of events have presented themselves as an opportunity to add to equities,” he stated. 

India may be disproportionately impacted on the loss side due to the rise in energy prices, it could also benefit should energy prices correct after war ends, he opined. 

Given the market correction, valuations may also start looking attractive once geopolitical tensions ebb, he feels. 

“In the last 15 months, Indian markets have underperformed the emerging markets by close to 45-50 per cent. For most FIIs in their emerging market funds, the highest underweight is on India. So, the moment things reverse, the vantage point may change, and India's valuations may look like at par to the multi-year averages,” Agarwal noted.

Where does he see pockets of opportunities in the market right now? 

“Our high conviction stance is on metals, power and semiconductors. These are areas that are seeing growth even in these times. So, if there’s a correction in any of them due to the ongoing war, then that may present a better opportunity,” Agarwal said. 

With the government’s emphasis on increasing manufacturing in India, while also giving a push to semiconductors, data centres and other infrastructure, electricity demand is only going to rise disproportionately, and that will benefit the entire power value chain, he explained. 

He is also bullish on public sector banks, whose valuations are not only generally cheaper than their private sector rivals, but they have also fared well on the bad loans and margins front. 

“For four straight quarters, the net NPAs of PSU banks have been less than private banks. Also, their credit growth and their deposit mobilisation capabilities have remained quite healthy. On the margin front too, they are at least in line with private banks, if not better. So, all these factors together put them on the right track.”

One sector that has taken a knock in recent months is information technology. Growth had already been slow amid the global trade and tariff-related uncertainties.

In the last couple of months, growing capabilities of various AI models have amplified worries over their growth prospects. Agarwal remains underweight. 

“In the IT sector, even before AI came in, growth numbers have been barely touching double-digits on profitability. Now, look at the next 5-10 years. With AI and the already high base levels, will they improve upon the previous decade? The higher probability is no, in our view,” he stated. 

Meanwhile, he remains positive on precious metals, especially gold, which he sees as a “monetary asset.” He pointed to the higher allocations to gold by global central banks amid, the huge debt-to-GDP levels in the US. In that backdrop precious metals look good, he said.