'We have seen worse things happening to the economy, but...': DSP MF's Rohit Singhania on market's tough phase

Indian equity markets are going through a tough phase, with weak sentiment weighing heavily on investor confidence, especially in mid- and small-cap stocks. However, the underlying fundamentals of the economy and corporate India remain largely intact, Rohit Singhania, Co-Head – Equities at DSP Mutual Fund, told Business Today TV. 

Singhania pointed out that there is a clear divergence between market sentiment and actual data. While portfolios have seen deep drawdowns and investors are disheartened after 12–18 months of muted or flat returns, macro fundamentals continue to provide support. Measures such as income tax cuts, interest rate reductions, GST rationalisation and sustained domestic inflows have helped cushion the economy. 

"We have seen 12-15 months of no returns. We have seen worse things happening to the economy, but nothing has happened to the market. Plus, the domestic flows, what we have seen continuing over the last more than three years. I think I would say that sentiment in one's mind or head, eventually things will die, things will improve," Singhania said. 

“Poor sentiment has capped returns, but it has also limited downside risk,” he said, adding that India is still relatively better placed compared to many global peers.

He noted that the market entered 2025 after several years of exceptional returns, which had lifted expectations sharply. The subsequent slowdown, earnings downgrades and global uncertainties—ranging from US trade actions to currency volatility—have taken a toll on confidence. Yet, despite these headwinds, domestic flows into equities have remained resilient for over three years, helping stabilise markets.

In such an environment, Singhania stressed the importance of sticking to basics. “When news flow keeps swinging between positive and negative, the only anchor is business fundamentals,” he said. At DSP, the focus remains on understanding businesses, assessing growth drivers, balance-sheet strength, risks and valuations, while consciously filtering out short-term noise.

Addressing concerns around investors pausing or stopping SIPs, Singhania was unequivocal. He said systematic investing is critical, particularly during volatile or sideways markets. Historical data shows SIPs deliver smoother, less volatile outcomes and help investors benefit from compounding over time. He cautioned against making decisions based on recent underperformance, noting that some of the best long-term returns have been generated during periods that initially felt uncomfortable.

“Whenever we meet investors, we always talk about how systematic investing in the markets helps. I’ve seen instances where markets have fallen sharply in a short period, and investors ask whether they should invest a lump sum. I believe a systematic investment approach is always the better strategy. And it’s not just my view—if you look at historical data across our funds or peer funds, SIP returns tend to be less volatile and more gradual,” Singhania said.

On sectoral positioning, Singhania said DSP remains constructive on financials, including both private and select PSU banks, citing strong capital adequacy, improving asset quality and reasonable valuations. The fund house has also turned overweight on IT after a correction, attracted by strong cash flows, dividend yields and valuation comfort, even as near-term growth expectations remain modest. Insurance, another underpenetrated segment in India, continues to be a structural opportunity within financials.