According to Devang Mehta of Spark Capital Private Wealth Management, while short-term repercussions are prevalent due to Indo-Pak tensions, Indian markets demonstrate strong resilience once clarity returns.
Unless accompanied by broader economic or global shocks, Indo-Pak tensions have not had a lasting negative impact, he said in an interview to Moneycontrol.
He believes, defence looks to be a multi-year theme, but stock picking will be critical here. "Alongside rising tensions between India and Pakistan, the sector’s bullish outlook is reinforced by strong order books, good operational performances and visibility for robust exports," said the Director – Equity Advisory at Spark Capital Private Wealth Management.
Do you think the market will be significantly impacted by a major escalation between India and Pakistan?
There was no market correction during Kargil, and even during the Parliament Attack, India outperformed the S&P 500 by quite a margin. While short-term repercussions are prevalent, Indian markets demonstrate strong resilience once clarity returns. Unless accompanied by broader economic or global shocks, Indo-Pak tensions have not had a lasting negative impact.
What are the major immediate risks for the market?
Apart from the prevailing geopolitical tensions, the other major cue for the market includes the upcoming trade negotiations, which can have an impact on the short-term trajectory of our & global markets. Most of the macros are in good shape in India, markets will also closely watch the ongoing earnings season.
Are you very bullish on defence stocks?
Defence stocks have been on a tearaway rally, with the Nifty India Defence index hitting all-time highs. Over the last month, its 12 percent gain has trebled the benchmark’s return. Alongside rising tensions between India and Pakistan, the sector’s bullish outlook is reinforced by strong order books, good operational performances, and visibility for robust exports. Looks to be a multi-year theme, but stock picking will be critical here.
What is your take on the precision engineering sector? Are you currently taking exposure to it?
The world is moving towards automation and robots. We don't have the technology to make robots, but we can make precision parts for such robots. Companies that manufacture precision engineering parts will be at a similar level to where IT companies were in the late 1990s and early 2000s. We like quite a few of them and are very positive on this futuristic theme. Some of our portfolio companies in precision engineering are already huge compounders and are geared for more.
Do you believe the India-UK agreement could be a significant driver of growth?
Post the latest US tariff announcement, there was a strong need to diversify textile exports, and with this FTA agreement, India's knitted and woven apparel can now gain a substantial foothold in the UK market. The agreement is also expected to stimulate investment and enhance the ease of doing business for textile stakeholders in both countries. The deal opens up massive export opportunities for labour-intensive industries and key sectors such as engineering goods, auto parts and engines, and organic chemicals.
What is your assessment of the quarterly earnings season so far?
India Inc has delivered a better-than-expected earnings performance so far for the March 2025 quarter. This can be the headline, but there are divergent trends in earnings and forward-looking guidance in different sectors. Even within the same sector, there is a distinct difference in earnings growth profile amongst peers.
Sectors like IT have seen subdued growth and cautious commentary. Few large banks exhibited a very good of set of numbers. Consumption, be it discretionary or non-discretionary, again showed completely company-specific trends. This is the last quarter of the year, and hence, a lot of clarity would emerge towards the end of this month when all the companies announce their quarterly and yearly numbers.
How do you interpret the Federal Reserve's monetary policy and Chair Powell’s recent commentary?
Fed Chair Powell, in remarks, said the central bank does not need to be in a hurry to adjust its monetary policy. The Fed is in a tough spot as the size and magnitude of tariffs are still evolving. This implies that another round of economic data releases will help shape further Fed action. The wildcard is that tariff policies continue to change rapidly, and with them, the economic outlook.
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