Geopolitical tensions in the Middle East, including the Iran-US conflict, may trigger near-term volatility in global markets, but $85-a-barrel crude will not derail India's growth story, according to Ajay Khandelwal, Head of Equities at Motilal Oswal Asset Management Company.
In an exclusive email interview with Tanmay Tiwary of NDTV Profit, Khandelwal said India could still clock around 6.5% real GDP growth, with the current account deficit (CAD) remaining manageable at about 1.5% of GDP, even if crude averages $85 a barrel.
Khandelwal said investors should not make a drastic portfolio shift based on geopolitics alone. Under the $85 crude scenario, he expects India's balance of payments to remain positive at around $48 billion, providing some comfort despite the risks posed by higher oil prices.
“We would not make a drastic portfolio shift based on geopolitics alone,” Khandelwal said.
Instead, he favours companies with strong balance sheets, domestic demand and pricing power, which he believes can remain better positioned if geopolitical tensions persist.
Khandelwal identified financials, defence and select domestic infrastructure as areas that could benefit from the structural environment. At the same time, he recommended greater caution towards oil-intensive businesses, highly leveraged companies and sectors vulnerable to imported inflation.
The fund manager's preference is therefore not to reduce equity exposure, but to improve the quality of portfolios amid volatility.
“Overall, this is a phase to increase portfolio quality rather than reduce equity exposure — using volatility to add to businesses with strong QGLP characteristics,” he said.
Khandelwal's comments come against the backdrop of a broader constructive view on Indian equities. While he acknowledges that valuations are not cheap, he believes healthy corporate balance sheets, improving return on capital employed and a supportive macroeconomic environment can support earnings growth.
He said stable interest rates, improving government and private capex and comfortable liquidity should also support growth over the coming quarters.
For investors, Khandelwal's message amid geopolitical uncertainty is clear: rather than making broad portfolio changes because of crude or global risks, focus on businesses that have the financial strength and domestic demand visibility to navigate volatility.
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