Dalal Street will be a better place by Diwali; buy this dip if it gets worse, says expert

Opportunistic investors can use the ongoing market dislocation to stock up on quality companies in consumption-oriented sectors, an expert says, as earnings and GDP growth will likely shore up equity prices over the medium term.

India’s benchmark Nifty Index has plunged 10 per cent to a 1-year low in the past 23 sessions, with the fall accelerating all through last week as the US-Israel-Iran conflict in oil-rich Middle East ruined risk-on sentiment globally. Import-dependent India was among the worst hit as crude oil hit a 44-month high as hostilities escalated and supplies choked. Oil has subsequently come off the boil.

"Historically, Indian markets have bottomed around 17-18 PE on Nifty, which translates to 23,800,” said Nischal Maheshwari, a seasoned equities watcher who has helmed two institutional brokerages in the past 3 decades. "You should be fully invested if markets corrected up to 5 per cent below this level. Diwali and end-2026 will definitely be a better place for Dalal Street.”

The Nifty ended 1 per cent higher at 24,261 on Tuesday, driven by short covering and hopes of a quicker end to the west Asian conflict.

BUY QUALITY

Mumbai-based Maheshwari says stock picking should focus on private and public banks, the CDMO space in the pharma industry, consumption-led themes such as the auto sector and the defense industry to begin with.

"I don’t see the market as broken. Oil prices will go back to $70-80/barrel as the market is oversupplied with production exceeding demand,” says Maheshwari. "We should see 10-12 per cent earnings growth for FY2026-27. Wars are always opportunities to add to existing positions. We have seen these dislocations several times since 1990s.”

Maheshwari is correct, of course.

Seasoned investors have weathered two Gulf wars, the Kargil conflict, the great financial crisis of 2008, political and social upheavals and myriad other cataclysmic events over the past three decades. Those who invested during painful times came out happier and wealthier, he adds.

One sector that Maheshwari is avoiding is the software services industry, owing to increased attention on the artificial intelligence (AI) space globally, something sorely lacking on Dalal Street.

"I haven’t been able to put my arms around AI. This is a bigger disruptor than oil prices.”