Global macroeconomic concerns could pose downside risks to Indian markets over the next few weeks, even as corporate earnings have remained stronger than expected, according to Pramod Gubbi, co-founder of Marcellus Investment Managers.
Speaking in an interview with NDTV Profit, Gubbi said corporate earnings for both the December and June quarters have surprised positively over the past six months. However, worsening global macro conditions, particularly uncertainty around crude oil prices, remain a key concern for markets.
“If the global macro remains challenging around oil prices, we might see interest rate hikes,” Gubbi said, warning that higher rates could eventually weigh on economic growth and equity markets.
He also cautioned that prolonged geopolitical headwinds could become increasingly worrisome for investors. Rising input costs could further pressure corporate profitability, with gross margin compression likely to continue for some time.
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On the consumption side, Gubbi expects some improvement in consumer volumes, particularly in the consumer staples segment. He said investors are closely watching volume growth in staples as a key indicator of the health of rural and urban consumption.
However, valuations remain a concern across large parts of the market. Gubbi said very few counters currently offer healthy valuations, making sector selection particularly important.
Financials Best Positioned
Among sectors, financials stand out for their combination of valuations and growth, according to Gubbi.
“Financials is the only sector with healthy valuations,” he said, highlighting the sector's relatively attractive risk-reward profile.
Gubbi is also positive on manufacturing exports, which have benefited from rupee depreciation, the China-plus-one strategy, trade deals and government support. He sees significant export opportunities emerging across chemicals, engineering goods, auto ancillaries and textiles.
Healthcare is another sector where Gubbi remains positive, supported by strong structural growth drivers.
Overall, while earnings resilience provides a positive backdrop, Gubbi believes investors need to remain cautious as global macroeconomic and geopolitical risks could keep markets volatile in the near term.
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