'Nifty On Gradual Dip, Focus On Tariff-Proof Sectors': V.L.A Ambala Picks Five Stocks To Buy For Long-Term

The Indian stock market snapped a six-week losing streak ahead of India's Independence Day 2025, buoyed by robust domestic inflows and strong macro indicators despite geopolitical headwinds. India Inc's latest quarterly earnings growth came in mixed which has weighed on sentiments.

However, S&P’s recent upgrade of India’s sovereign credit rating to BBB is expected to boost investor sentiment and support growth. On last year's Independence Day, the NSE benchmark Nifty 50 stood at 24,143.75, nearly 490 points away lower than today's 24,631.30. In the last one year, several triggers have contributed towards the upward momentum of the index.

However, amid the ongoing US-India trade deal negotiations, the stock market sentiment has turned sour over the cautious approach adopted by investors. Traders are on edge due to the dynamic geopolitical events.

In the current market scenario, V.L.A Ambala, a SEBI-registered Research Analyst said in interview with NDTV Profit's Nikita Prasad that Nifty 50 is showing a weak momentum and may experience a gradual downside in the near-term. The D-Street expert believes investors should bet on domestic cyclicals and monopoly players for the next one year.

1. How do you view the impact of US tariffs on the Indian stock market? How much correction do you see for Nifty and Sensex in the next 2-3 months?

The US trade tariffs can dampen broader investor sentiment if they are targeted toward sectors where India is engaged in exports. Such a move would act as a blow to the earnings of affected companies and tip the scales of global trade flows. Notably, India’s direct export exposure to the US is not as high as that of some Asian peers.

We must understand that market sentiment is mostly driven by global risk-off moves. Currently, the Nifty is showing a YTD gain of 4.10% and a 2.5% gain on a YoY basis. However, on the technical chart, momentum seems weak as the index formed a dark cloud cover bearish candlestick pattern.

Additionally, for only the fourth time in history, Nifty 50 has closed six consecutive weeks in the red, reflecting sustained selling pressure. Based on prevailing sentiment, I expect a gradual downside rather than a sharp fall. In fact, Nifty could test the 23,000 to 23,700 zone in the next two to three months, over the absence of positive triggers from global markets.

2. Nifty and Sensex have risen over 3% YTD. From last year's Independence Day till today, what are the key factors that have moved the Indian markets?

If we analyze the trends and market sentiment over the last one year, several factors emerge as key drivers. However, global cues such as the US Fed’s interest rate stance, US inflation trends, and crude oil price spikes that have caused intermittent volatility and global market impact could be considered among the top triggers.

The earnings season was another significant trigger. Mixed corporate results and mounting pressure on IT and export-oriented sectors raised concerns, while domestic manufacturing and auto sectors demonstrated resilience. Meanwhile, FII and domestic inflows remained a major talking point throughout the year.

On one hand, large FII outflows in Q1 FY25, especially during April–May, alarmed the markets. On the other hand, domestic inflows helped cushion the decline. Geopolitical tensions, particularly the conflict in the Middle East and shifts in trade dynamics, periodically hampered market sentiment. Alongside these challenges, focused PLI schemes, pre-budget buzz and infrastructure pushes provided a boost to selected sectors.

3. India Inc. earnings growth has been muted for the last few quarters. Do you see some recovery in Q2 or Q3? What is your estimate for FY26 earnings growth, given the current global headwinds?

Weaker global demand and pricing pressure in IT and pharma exports have definitely dented India Inc.’s earnings growth. Based on the prevailing sentiment, Q2 FY25 and Q3 FY25 will likely report some fluctuations.

For FY26, Nifty companies’ EPS growth is now projected around 9% to 10%, which is below previous expectations of 14% to 15%. In fact, headwinds such as tariffs and commodity volatility could cap export earnings and weigh on the upcoming financial year’s growth prospects.

4. Despite elevated valuations and FII outflows, analysts are optimistic on India's long-term growth story. Do you agree that defensive stocks and domestic cyclicals are the top bets? Where do you see the potential pockets of growth or opportunities for investors?

Yes, defensive stocks such as FMCG, utilities, and healthcare, along with domestic cyclicals like infrastructure, capital goods, and cement, are well-positioned in the current environment. Investing in defensive stocks can offer stable earnings if global risks escalate over time. Similarly, domestic cyclicals are more likely to benefit from increasing government spending, upbeat real estate momentum, and the urban capex cycle.

My analysis suggest that defense manufacturing, including both PSUs and private suppliers along with the power sector, especially renewable-linked companies, railways and logistics under infrastructure expansion, and select midcap manufacturing exporters in chemicals, cement, and auto ancillaries, could emerge as promising pockets of growth.

5. What should be the trading strategy for investors this year given the current uncertainty? Where do you see Nifty and Sensex levels by December-end and the next Independence Day?

Judging by the current momentum, I do not recommend over-investing in the market. Market participants should focus on monopoly players and tariff-proof stocks such as CDSL, MCX, and Larsen & Toubro.

At present, a sense of uncertainty has gripped the market and in such conditions, capital preservation and selective accumulation should remain the top priority for both new and seasoned investors. Recent data indicate that FPIs are shifting funds from equities into debt instruments. Despite this trend, the USA and Singapore remain India’s largest FPIs.

I suggest adopting a sell-on-rise strategy near Nifty's resistance levels of 25,200 and accumulating in phases near support levels of 23,200–23,600. Investors should also avoid heavy allocations at weak support zones if they are considering fresh investments in ETFs.

From a sectoral perspective, I recommend allocating 30–35% to defense, around 40% to quality domestic cyclicals with high dividend growth, and maintaining a small exposure of 10–15% in high-growth midcaps.

They should not chase momentum in overvalued midcaps and small caps. Considering these aspects, by December-end, we can expect Nifty to trade within the 25,200 to 24,000 range and create trading opportunities within this band.

6. What are your top five stock picks for the next one year, till India's 80th Independence Day?

My top five stock picks for the next one year are Adani Green, Refex, CDSL, CEAT Ltd., and Aarti Industries. Investors should conduct thorough due diligence to ensure these stocks are a good fit for their portfolio objectives and risk profile before investing.

Disclaimer: NDTV Profit is a subsidiary of AMG Media Networks Limited, an Adani Group Company. Further, the views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.