Don't fear the market fall. Buy the volatility, says this fund manager — and here's why

Stock markets have been extremely volatile this year amid geopolitical uncertainties following the US war on Iran. The BSE Sensex and NSE Nifty 50 indices have declined 10% and around 8.5% year-to-date. On Wednesday, July 22, the benchmark indices were down close to 1% in intra-day trading.

Valuations in at least the top 250 companies now offer more comfort, and investors should use such corrections to focus on and add stocks that offer long-term growth opportunities, according to Saurabh Kataria, head of equities at Trust Mutual Fund.

Several events over the past few years have affected equity markets, from the COVID-19 pandemic in 2020-21 to the Russia-Ukraine war, last year’s US import tariff-related uncertainties and now the West Asia conflict. This volatility is here to stay, and in such an environment, investors should look at the bigger picture instead of focusing on the short term, which is difficult to predict, he told Business Today.

“The market will react on a daily basis, and you have to use this as an opportunity to increase allocations to something that probably has a 5-, 10- or 15-year runway. You stay on the path and add to your highest conviction,” Kataria stressed.

Markets have barely delivered any returns for more than 12-15 months, amid heavy selling by foreign institutional investors worried about geopolitical uncertainties and growing interest in artificial intelligence-related themes, an area where opportunities in India remain limited.

In 2025, foreign portfolio investors (FPIs) sold equities worth Rs 1.66 lakh crore. In 2026, FPIs have sold another Rs 2.60 lakh crore worth of equities.

Valuations in large-cap stocks are now lower than their 5-10-year averages. In mid-caps too, valuations are lower than their five-year averages and in line with their 10-year averages, Kataria said.

Notably, he pointed out that periods when markets have delivered muted returns over two years have historically been followed by fairly strong returns in the subsequent one to two years, especially when earnings have been stable.

Kataria believes there has been too much pessimism around India, especially on the AI front and the spike in commodity prices, and that the country’s consistent long-term growth trajectory will eventually be appreciated again by investors.

While there will be an impact on April-June quarter corporate earnings due to the West Asia crisis and the resultant spike in commodity costs, he does not see any major downgrades to long-term earnings expectations.

“We are at a point where earnings are fairly stable to strong and valuations are relatively okay. So, I would think it is a good time to invest even for the next two to three years rather than just wait around for more correction, because more money is lost in waiting for corrections than in actual corrections,” Kataria said.

After the massive sell-off over the past 15-odd months, FPIs have been net buyers to the tune of Rs 13,610 crore this month till July 21, perhaps a sign that they may be slowly beginning to reassess opportunities in India as valuations turn more attractive. Whether this trend will last remains to be seen.

Kataria is very positive on the financialisation of savings, a trend that should benefit the entire ecosystem of related companies, including asset managers and insurers. Premium consumption is another area he remains extremely upbeat on.

“We believe that as the country’s per capita income increases, there can be a J-curve in many premium consumption categories, whether high-end retail or high-end automobiles,” he noted.

Energy transition as a theme is also here to stay, and companies associated with it, whether in renewable power, capital goods or related sectors, offer a long runway too, according to Kataria.

On the other hand, he remains underweight on large-cap IT companies. Software services companies have seen heavy selling in the past few months on concerns that AI will disrupt their business models.

Kataria pointed out that growth at IT services companies had begun to soften even before AI. The growing number of global capability centres (GCCs) had already started to eat into their growth to some extent, and the advent of AI has now raised questions about whether these companies will be able to sustain even those low levels of growth. There is no credible answer to that right now, he said.

“Some of these companies are definitely cheap, but they are not growing fast enough to even sometimes justify that level of pay,” Kataria said.

He believes India could see a shift over time from being a services-oriented economy to a more manufacturing-led one, aided by various PLI (production-linked incentive) schemes and the Make in India push. But he stresses that these are not short- or medium-term trends and will have to be watched over the long term.