The Indian equity market faces several risks that could drive volatility and potential derating, even as domestic growth remains resilient with GDP projections above 7% and signs of recovering private capex. According to market experts, the most immediate concern is geopolitical escalation in the Middle East, particularly tensions involving Iran, Israel, and the US, which have already triggered sharp market weakness in March 2026. However, according to investment management firm DSP Mutual Fund, valuations are starting to become attractive which could result in positive near-term inflows for the domestic market.
Valuation is a key metric for long-term investments, Vinit Sambre, Head of Equities at DSP Mutual Fund told NDTV Profit on Wednesday, March 25. The Indian stock market has corrected nearly 13-15% from its peak in September 2024. The D-Street experts eyes 'smart money' bets to turn selective on sectors amid the heightened market volatility. Sambre believes smallcaps have not outperformed in the current market correction underway and expects near-term sharp moves in a narrow range.
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DSP's Vinit Sambre's Selection Playbook
Valuations are getting better after hope returned to the market with indications of deescalation in the Middle East conflict. Remarks from US President Donald Trump and from the Iranian regime indicate that the conflict might end soon. Analysts believe that the reiteration from Iran that "non-hostile ships can transit the Strait of Hormuz" is good news that will mitigate India's energy concerns. In the current scenario, DSP's Vinit Sambre the deescalation of the war will give some confidence to investors.
''As we progress towards quarterly numbers, they will show disappointment because of disruptions in the suuply chain due to the geopolitical tensions. So, these weaknesses will not immediately lead to gains. So, in the short-term, we'll have a sharp movement in the market but in the narrow range,'' Sambre told NDTV Profit. Smallcap stocks might undergo a stress test amid the current volatility. Largecap stocks remain safe bets for the long run, according to the market expert.
Among top sectoral bets, Sambre picked banks, NBFCs and auto ancillary stocks to focus on in the near-term. Analysts bet that while the base case for FY27 remains constructive-with equities potentially delivering decent returns if corporate earnings come through and geopolitical risks ease-the near-term risk-reward tilts cautious amid these pressures. Selective stock-picking focused on earnings visibility and reasonable valuations will likely prove more effective than broad market exposure, keeping markets range-bound or volatile until greater clarity emerges on oil prices, FII flows, and trade developments.
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