Ajit Banerjee, President and Chief Investment Officer of Shriram Life Insurance, says oil marketing companies (OMCs) are trading at fair valuations. He suggests that investors looking at the mid-to-long term could consider taking some exposure now.
He cited that the government has been supportive of OMCs by providing them sufficient marketing margin, paying under-recoveries on LPG and reducing the number of free LPG domestic cylinders to reduce losses, so that OMCs can fund their large capex numbers.
Banerjee expects near-term volatility to continue in the market due to the tariff-related uncertainty and weak earnings season to continue in Q2FY25 as well. As of now, it seems that the market has factored in the imposition of 50% tariff by the US, he said in an interview to Moneycontrol. Here are the edited excerpts
Given the significant fund flow into equities via SIPs, do you think Indian investors are now less concerned about market corrections and have matured in their investment approach?
Equity mutual funds raked in Rs 42,702 crore in July 2025, which is the highest monthly inflow so far, out of which SIP inflows set a new record inflow of Rs 28,464 crore compared to Rs 27,269 crores received in June 2025. There has been a significant change in the investor mindset post-Covid regarding the approach towards investments into equities, related to building the equity portfolio and the intent to managing the portfolio and measuring the returns over a long-term period of at least three to five years.
Earlier, with any correction markets used to see panic selling by investors, which is rare in last five years. On the contrary, any dip in the markets is being looked at as an entry point or considered as an opportunity for raising exposure. The DIIs and retail investors have provided great stability to the equity market and have given the required cushion to the market to offset periodic outflows by FIIs. Therefore, Indian investors have certainly become more mature in their investment approach over the last few years.
Do you see compelling opportunities in oil marketing companies (OMCs) at this point?
We believe OMCs are fairly priced at the current levels. The government has been supportive of OMCs by providing them sufficient marketing margin, paying under-recoveries on LPG and reducing the number of free LPG domestic cylinders to reduce losses, so that OMCs can fund their large capex numbers.
However, due to their reliance on imported crude oil, its supply and prices will need to be closely monitored due to the volatile geopolitical environment. Street expectations on marketing margins for FY27 are lower from the current levels of Rs 10-12 per litre for diesel and petrol. Additionally, investment in refining and petrochemical will start contributing to earnings soon. So, from a mid-to-long-term perspective, one may choose to take some exposure at this point of time.
Will the implementation of the additional 25% tariff in the last week of August pose a material downside risk to the Nifty?
Nifty 50 has fallen nearly 4% in the last one month, primarily driven by tariff-related concern over how it may impact the Indian economy after taking into consideration both primary and secondary effects. As of now, economists expect a downside impact of 40 bps to 60 bps on the projected FY26 GDP numbers of the country.
We expect near-term volatility to continue in the market due to the tariff-related uncertainty and weak earnings expected to continue in Q2 as well. As of now, it seems that the market has factored in the imposition of 50% tariff by the US, so unless there is some new negative news popping up which has potential to damage further the market sentiment, it will move in a range-bound manner.
FIIs are continuing to sell from the last one month which is getting offset by inflows from domestic investors and providing the required support to market to slide into a deep correction.
Do you think the subdued business outlook is already priced into IT stocks? If so, does it make sense to begin gradual accumulation now?
The recently announced US tariffs on Indian exports do not directly cover IT services; however, they could have second-order effects, impacting demand for both existing contracts and new deal wins. Given the Indian IT sector’s high dependence on the US market, any adverse impact on the US economic growth, inflation or broader macroeconomic conditions, potentially arising from tariffs, may lead to reduced technology spending and lower commitments from large US-based clients. This would, in turn, weigh on the growth prospects and revenues of the Indian IT services firms. Tariffs are expected to affect all sectors in the US, with the BFSI segment, one of the largest client verticals for the Indian IT, likely to see indirect pressures.
Q1FY26 results reflected the impact of a ramp-down in existing deals and a slower ramp-up of newly won contracts, partly due to the trade tariff uncertainty.
While the deal pipeline remains healthy, it is skewed toward cost take-out and large vendor consolidation opportunities, with discretionary spending still subdued. EBIT margins in FY26E are now projected to decline or remain flat, compared to earlier expectations of stability, as most levers for margin expansion have already been utilised.
At present, the sector trades at a 1YF P/E of 23.8x versus its 10-year average of 22.7x. Waiting for valuations to approach the 10-year average or -1 standard deviation could offer a better entry point to go overweight, as near-term earnings expectations have been tempered and the muted growth of the past two years sets up a low base for moderate growth in FY27–FY28.
Do you believe the power utilities space is fairly valued? If yes, would you be a buyer at current levels?
Looking at the valuations currently, the power utility stocks are fully valued. It will be sensible to wait for a correction to make an entry, as stocks might at best deliver returns closer to the Networth/Book value accretion. Having said that, we should also consider that in the mid- to long-term, the energy sector—both conventional and non- conventional—is poised for growth, as power demand is expected to increase at 6% in India.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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