India markets outlook: Varun Goel sees opportunity in 4 sectors amid geopolitical tensions

Synopsis

Indian equity markets are in a rangebound phase, presenting opportunities for investors. Strong macroeconomic fundamentals support a positive outlook. Sectors like solar, wind, EV, and durable consumption show growth potential. Crude oil prices are expected to cool. Green energy and resilient consumption are key themes. Investors are advised to stay invested and focus on quality businesses with visible earnings growth.

Indian equity markets may be going through a rangebound phase, but seasoned investors see this as an opportunity rather than a red flag. Varun Goel, Senior Fund Manager at Mirae Asset Investment Managers, says the post-correction consolidation of the last 18-20 months has set the stage for a healthier market ahead and he favours solar, wind, EV, and durable consumption sectors.

Markets look fairly valued

Goel points out that Nifty 50 companies are expected to deliver around 14-15% earnings growth over the next 12 months. Despite geopolitical uncertainty weighing on sentiment, he believes India's macroeconomic fundamentals remain solid and the broader market outlook is positive.

The crude oil question

One of the biggest risks hanging over Indian markets is rising crude oil prices. Goel, however, draws comfort from history. Over the last 25 years, crude oil prices have never sustained above $100 per barrel for more than six months. High prices eventually trigger demand destruction globally, pulling prices back down.

Even if a ceasefire does not happen quickly, Goel expects prices to cool in three to four months. In the short term, though, higher crude could push inflation up and lift bond yields, putting some pressure on the banking sector.

Green energy gets a push

A silver lining from the energy crisis is the acceleration of India's shift toward cleaner fuels. Goel sees strong growth potential in solar and wind energy companies, transmission and distribution players, and electric vehicle manufacturers across both two-wheelers and four-wheelers.

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Ethanol blending is another area to watch. India is already at 20% blending for petrol, and a diesel blending programme could follow. These structural shifts, Goel says, will reshape India's energy mix over the next decade.

Consumption remains resilient

Despite raw material pressures, consumer demand has held up well. Auto sales and GST collections have remained strong. Goel is particularly bullish on consumer durables, air conditioners, washing machines, and refrigerators, given a strong summer season. He continues to favour discretionary consumption across food, beverages, and durables.

Caution on EMS companies

Electronics Manufacturing Services companies have had a tough run, with disappointing earnings and a muted outlook. Goel sounds a note of caution here. These businesses run on thin margins and long working capital cycles, making them vulnerable when bond yields and commodity prices rise together. While the long-term growth story remains intact, near-term profitability could stay under pressure.

Banking sector: Healthy but watch margins

Private banks may face some pressure on borrowing costs as yields rise, which could squeeze margins. But Goel is not overly worried. Credit growth is running at 15-16%, and even if it slows to 12-13%, that is still healthy. More importantly, asset quality across the banking system is in good shape, which provides a strong buffer.

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Metals: Valuations getting stretched

The metals sector has delivered impressive returns over the past 6-12 months. Steel remains a more stable story, protected by import duties. But Goel flags concern that valuations in other metals have run ahead of actual earnings delivery. He advises caution in this space.

Defence: A structural long-term bet

Goel remains bullish on defence stocks over a three-to-five year horizon. Larger defence PSUs carry strong order books with clear revenue and profit visibility. Some smaller defence names have become expensive, but tier-one defence companies continue to offer a healthy earnings trajectory.

The overall message from Goel is clear; stay invested, be selective, and look at quality businesses with visible earnings growth. The current uncertainty is temporary; India's structural story is not.

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