Krishna Sanghavi, Chief Investment Officer (CIO) – Equities at Mahindra Manulife Investment Management, believes sector rotation is likely to be a dominant market theme. In an interview with Mint, Sanghavi said the impact of can linger for some time even after the conflict is resolved. He pointed out that amid elevated volatility, value-oriented investment approach held up well during FY26.
Edited excerpts:
1. The end of the US–Iran conflict may reduce volatility, but can higher energy prices have a longer-term impact on the Indian stock market?
It is still early to assess the full economic implications of the US–Iran conflict, especially since neither a clear end is in sight nor is there visibility on the extent of damage to energy infrastructure. In a best-case scenario, resolution would lead to quick normalization of energy supply and prices (oil and gas), though the probability of this outcome appears low.
The base case is that energy prices remain elevated for some time until global energy supply chains and logistics normalise. In such a scenario, the second-order impact on the economy—and hence on equity markets—could persist even after the conflict ends.
One positive factor for India is our logistical proximity to the conflict region. This could support a relatively quicker normalization of energy supplies compared to many other countries once disruptions ease. Translating macroeconomic implications into equity market outcomes remains both interesting and challenging. While elevated energy prices may weigh on growth, Indian markets could still appear attractive to global investors on a relative basis post-conflict, especially after adjustments in prices, time, and currency compared with other emerging markets.
2. What should be the medium-term investment strategy in this market?
Adopting a medium-term perspective helps look through near-term uncertainties. Over this horizon, the assumption is a gradual normalization of energy supply and, to some extent, energy prices. India’s structural growth story—driven by economic expansion, corporate earnings growth, increasing domestic investible surplus, and relative attractiveness to global investors—remains intact. Accordingly, investors should continue disciplined investments such as systematic investment plans (SIPs) to benefit from medium-term normalization and compounding.
3. Is this the time to increase exposure to defensive sectors as market visibility remains limited?
Markets have become increasingly short-term in their sectoral preferences. Therefore, exposure to any specific theme should be evaluated through the lens of relative valuations across sectors. At this stage, a higher allocation to defensive sectors such as energy (oil, coal, power), healthcare, and select consumer staples appears relatively safer. However, this positioning should remain dynamic, with close monitoring of developments related to geopolitical tensions and conflict resolution.
4. Which sectors are you looking at over the next one to two years, and why?
Sector rotation is likely to be a dominant market theme. While defensives appear well placed in the near term, they may eventually give way to cyclicals, financials, and consumer discretionary sectors as geopolitical stability improves and energy prices normalize. As uncertainty fades, these sectors could benefit from improving growth visibility, stronger balance sheets, and a pickup in consumer and investment demand.
5. Your value fund, launched a year ago, has delivered healthy returns. What has driven the outperformance?
The value-oriented investment approach has held up well during FY26 amid elevated volatility. Performance has been driven largely by selection across traditional, old-economy sectors such as metals, power, energy, and PSU banks. Additionally, the fund’s underweight positioning in private sector banks and consumer-focused stocks also contributed positively to relative performance.
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.