The RBI’s latest policy commentary and growing concerns around the West Asia conflict are reinforcing the case for selective investing, with largecaps, banks and capex-linked sectors emerging as preferred bets amid elevated macro uncertainty, according to George Thomas of Quantum AMC.
Speaking at a time when markets are grappling with rising crude prices, currency pressures and slowing earnings momentum, Thomas said investors should moderate return expectations and focus on bottom-up opportunities rather than broad market rallies.
“This is a very interesting time. There is a clear cautious pause from RBI and also the growth slowdown clearly pencilled in,” Thomas said. While acknowledging near-term challenges, he added that “the entire policy continuity is still there. The medium term, the capital expenditure will continue, and so on and so forth.”
The market veteran believes the central bank’s revised projections underscore growing caution. “It is a clear cautious pause from RBI in terms of the inflation pencilled at 5.1% as well as the growth at 6.6%. It is very clearly suggesting that RBI is more cautious about this situation,” he said.
While India remains better positioned than during previous episodes of macro stress, Thomas warned that global risks cannot be ignored. “The global risk, especially emanating from US, the US being the largest economy and with the largest debt in the world and so on, that risk still is really looming over the world.”
Against this backdrop, he expects the market to remain highly selective. “The market has moved towards a clear stock pickers market rather than a consensus rally or high beta rally,” he said.
Thomas also cautioned that earnings growth is entering a more challenging phase after the post-pandemic boom. “The earnings growth for the next two quarters will be really challenged by the energy crisis, that is for sure.”
While he remains constructive on banks and capital goods, he expressed concern over stretched valuations in the broader market despite visible macro risks. “The smallcap valuation is around 3.2 times. So, it is more or less like a 2007 kind of valuation,” he said, adding that largecaps appear better placed from a value perspective following sustained foreign selling.
Looking ahead, Thomas favours sectors linked to India’s capex cycle and domestic economic recovery. “We like the entire reflationary basket as an investment avenue if you look at it from a commodities, engineering, capital goods, real estate, PSU banks or private banks,” he said.
He is also constructive on healthcare and selects value opportunities in the broader market. “Healthcare is one area where we are very constructive,” Thomas said, while noting that “the large banks are looking very attractive to us.”
With geopolitical risks, currency volatility and energy prices likely to dominate the market narrative in the coming months, Thomas believes investors should remain disciplined and focus on sectors with structural growth drivers rather than chase momentum in expensive pockets of the market.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
