Geopolitical tensions may continue to cloud market sentiment, but they are unlikely to derail India's longer-term investment story, according to Matt Orton, Head of Advisory Solutions & Market Strategy and Chief Market Strategist at Raymond James Investment Management.
Speaking to NDTV Profit, Orton said foreign institutional investor (FII) inflows could remain uneven in the near term as investors seek greater clarity on the rupee and global macroeconomic conditions. Even so, he believes India's earnings outlook and relative valuations continue to make it an attractive market.
"It's been very encouraging to see investor activity come back to India," Orton said. "Until we have clarity with respect to where the currency's going to go, I think FII flows will be challenged." He expects the next leg of foreign buying to depend less on geopolitical headlines and more on the corporate earnings season.
"If earnings season starts to show that you haven't seen degradation of consumption in India, especially from the banks, I think that's going to give investors confidence to continue to come back," he said.
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Among sectors, Orton continues to favour financials on market weakness and sees opportunities in real assets. His preferred stock ideas include Adani Ports & Special Economic Zone, DLF and NTPC.
"I would continue to use downside opportunistically in financials," he said. "Adani Ports remains one of my favourites. DLF is an area I've been looking at much more closely, while NTPC looks attractive on dips."
Orton also cautioned investors against overreacting to the latest flare-up in West Asia, saying markets have become more resilient to geopolitical shocks.
"Every time we think we're through this, it just starts again," he said. Rather than trying to predict geopolitical outcomes, investors should focus on "idiosyncratic stories" where earnings are driven by company-specific factors.
On the macro front, he expects policymakers to stay alert to inflation risks but does not foresee crude oil returning to the triple-digit levels seen in previous energy shocks. Instead, he believes the bigger question is whether higher energy costs spill over into sticky services inflation.
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