Expert view on markets: Shrikant Chouhan, the head of equity research at Kotak Securities, believes that while the worst may be behind and valuations have turned attractive, elevated crude oil prices remain a key challenge.
“For the rally to sustain beyond 25,000 and extend further, crude prices need to cool off to around $70–75 per barrel,” Chouhan said in an exclusive interview with Mint.
As uncertainties persist, Chouhan says one should prefer large-cap companies, which are better positioned to withstand volatility and offer stronger stability for long-term investors. Edited excerpts:
Can Nifty go beyond 25k if a final end to the war is announced?
Based on the current market performance and broad-based participation, I believe the market has already seen its worst phase.
When the Nifty was around 22,000, it was trading at nearly 16–16.5 times FY28 earnings, which appeared to be an attractive valuation zone for long-term investors.
The market can potentially move towards 25,000 and may even cross that level. However, for the rally to sustain beyond 25,000 and extend further, need to cool off to around $70–75 per barrel.
If that does not happen, we may witness a range-bound market movement going forward.
What should be our medium-term investment strategy in this market?
Our medium-term investment strategy should be to adopt a buy-on-dips approach with a long-term perspective.
In the near term, there is still limited clarity on how quickly crude prices may cool down to the $70–75 range.
If the war continues for an extended period, elevated crude prices could weigh on sentiment and create pressure in the near to medium term, which may lead to market weakness.
While I do not expect the market to break its previous lows, under continued uncertainty related to the war, the Nifty could witness a decline towards the 23,000 level.
Such corrections should be viewed as opportunities to accumulate quality stocks.
At this stage, investment preference should remain towards large-cap companies, which are better positioned to withstand volatility and offer stronger stability for long-term investors.
What are some of the growth segments that you are looking at now?
For the time being, our focus should remain on sectors such as BFSI, capital goods and engineering, power equipment, and power generation companies.
These segments are relatively better placed to act as defensive growth plays during periods of uncertainty.
The BFSI sector stands to benefit from improving credit growth, healthy balance sheets, and stable asset quality.
Capital goods and engineering companies continue to gain from domestic capex trends, infrastructure spending, and manufacturing expansion.
Meanwhile, power equipment and power generation companies are well-positioned due to rising energy demand, capacity additions, and ongoing reforms in the sector.
Compared to many other sectors, these areas currently offer a better balance of stability, earnings visibility, and long-term growth prospects.
Is IT a sector to look at now, or should we stay clear?
The performance of the IT sector in FY26 has been shaped by a mix of structural and near-term challenges.
Growth faced multiple headwinds, including the rapid emergence of AI, geopolitical uncertainties, and increased insourcing by a few large clients.
That said, the geopolitical impact has been relatively contained, largely affecting the travel segment and select regions such as the Middle East.
At the same time, we are seeing a clear shift in customer priorities. Enterprises are eager to accelerate AI adoption, but their current technology infrastructure is not yet equipped to scale these capabilities.
As a result, spending is increasingly being directed toward upgrading IT infrastructure, modernising core systems, and building robust data foundations.
Generative AI readiness is also becoming more tangible. Companies are investing in workforce upskilling, expanding AI budgets, and strengthening their consulting capabilities.
However, this transformation comes with a trade-off. As AI capabilities improve rapidly, especially foundational models, we anticipate a degree of revenue deflation in the range of 3% to 3.5% annually over FY27 to FY29.
On a more positive note, developed markets are showing signs of recovery. Increased business momentum in these regions is expected to support a sharper rebound in the near term.
Deal activity has also remained strong. Large order wins have been driven by vendor consolidation, AI-led transformation programs, enterprise-wide AI scaling, and modernisation across digital core, code, and data platforms.
Additionally, operating model transformation and regulatory compliance initiatives have contributed significantly.
It is worth noting that renewals continue to form a substantial portion of deal wins, accounting for approximately 50% to 55%. Tech Mahindra, TCS, Infosys, and Coforge are our key picks.
When can Bank Nifty scale a fresh peak? What do tech charts suggest?
The Bank Nifty has already witnessed a strong rally from lower levels, moving from around 50,000 to nearly 57,000 currently.
From a technical perspective, the index still has the potential to move towards the 60,000 mark in the near term.
However, sustaining above 60,000 and scaling a fresh all-time high would likely require strong positive triggers such as improved earnings visibility, supportive global cues, easing crude prices, or a fresh round of institutional buying.
In the absence of such triggers, the index may continue to witness range-bound movement.
Technically, Bank Nifty is likely to trade within a broad range of 54,000 to 60,000 for some time, with stock-specific opportunities emerging within the banking space.
Mid and small caps are still at a stretched valuation? What should be our strategy for these segments?
Mid and small-cap stocks have already undergone a meaningful correction over the last 15–18 months, with several names declining by 50–60% from their peaks.
This correction has made valuations more reasonable in select pockets and could attract buying interest where growth visibility remains strong.
However, these segments are likely to remain highly volatile as long as uncertainties related to the war and global developments persist.
Investors should therefore avoid a broad-based approach and remain selective.
Our strategy should be to focus on fundamentally strong companies with sound balance sheets, earnings visibility, and scalable business models.
Selective buying in quality mid and small-cap stocks with a long-term view would be the prudent approach at current levels.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.