Speaking to ET Now, market expert Neeraj Dewan described Wednesday’s trading session as “a seesaw kind of a day,” with markets swinging sharply before recovering strongly on positive geopolitical headlines.
“Yesterday definitely was a seesaw kind of a day. You saw market doing well, then it gave up all the gains and then the news flow came in,” Dewan said.
According to him, the near-term direction of the market remains closely tied to developments around the US-Iran situation, especially because traders had built cautious positions in sectors sensitive to crude oil prices.
“I feel that in the shorter term definitely this US-Iran deal is going to be very important for our market because lot of positioning has been done in the market,” he said.
Crude-Sensitive Sectors Could See Sharp RecoveryDewan noted that concerns over inflation and elevated crude prices had weighed on sectors such as banking, automobiles, auto ancillaries and real estate in recent weeks. Any meaningful correction in oil prices following a diplomatic breakthrough could trigger aggressive short covering in these pockets.“If this deal is going to happen, then in the shorter term there can be some short covering in those sectors which can take the market up from these levels,” he said.The market has remained range-bound around the 24,000 mark despite intermittent rallies, but Dewan believes easing geopolitical tensions could provide the momentum needed for a stronger breakout.
“We have been very close to 24,000. We have had 200-300 points above that, below that, we have been languishing there only,” he observed.
Earnings Season Offers Domestic ComfortWhile global developments remain critical in the near term, Dewan believes domestic fundamentals are steadily improving. He pointed out that the ongoing earnings season has largely surprised positively, especially within the broader market.
“Besides that, the earning season so far has not been that bad. There has been a quite decent earning season. Midcap, smallcaps have also started contributing,” he said.
He also highlighted encouraging performances from FMCG companies, citing Nestle India as an example of resilient earnings momentum. “I feel that there is lot of value in the broader market still even after the runup we have seen recently,” Dewan added.
He expects economic activity linked to domestic themes to gain further traction after election results, benefiting sectors such as infrastructure, railways, defence, water and real estate.
“My outlook for the market will be pretty constructive,” he said. “If the deal is happening, in the shorter term that will matter, but on the medium to long term also we are well placed where a broader rally can play out in the markets.”
Midcaps and Smallcaps Still Hold OpportunityAfter a nearly 10% rise at the benchmark level and an even sharper rally in mid- and small-cap stocks, investors are debating whether the next phase of gains will be led by largecaps or broader markets.
Dewan remains firmly bullish on the mid- and small-cap universe. “It will be more into mid and smallcap space where still there is valuation gap,” he said.
Despite the recent rebound from March lows, he believes many investors are yet to recover losses incurred during the sharp correction seen between September and October 2024.
“Still people have not made that kind of return, they are still in losses as far as the broader portfolios are concerned,” he noted. However, he cautioned that the market is increasingly becoming stock-specific rather than sector-driven.
“So, it going to be more stock specific rather than sector specific from these levels because we have seen some rally already playing out,” he said.
IT Remains a Selective BetOn the information technology sector, Dewan said the broader mood has not materially improved despite sharp corrections in several names.
“Actually, generally the mood has not changed because even the outlook given by some of the top companies has not been that great for the next year,” he said.
Still, he believes select opportunities exist. He cited relatively stable commentary from TCS and strong performances from companies like Oracle Financial Services Software.
“You cannot generalise and buy stock because they have corrected,” he cautioned. He also pointed to weakness in HCL Technologies after disappointing guidance, underlining the need for selective exposure.
Defence Spending Theme IntactDefence stocks continue to remain among the market’s strongest performers this year, supported by expectations of sustained government spending and a robust order pipeline.
Dewan acknowledged that valuations in the sector are no longer cheap after the sharp rally, but believes long-term investors can still generate healthy returns.
“As far as defence is concerned, I think that the spending on defence is going to increase, that is for given,” he said.
Among his preferred names, he highlighted Mazagon Dock Shipbuilders and BEML. “Mazagon is one company where I feel they have a good order book, execution has been good so far,” he said.
On BEML, he added that its exposure to both defence and railway opportunities makes it attractive over the medium term. “I like more of the public sector companies there because they have been present for quite some time,” Dewan said.
Realty Rebounds on Value BuyingThe real estate sector, which had underperformed through much of the previous financial year, has seen a strong comeback in recent weeks. Dewan attributed the rally largely to value buying after steep corrections in frontline property stocks.
“Even if you look at companies like DLF they had fallen so much in the last one year,” he said. According to him, investors are once again recognising the intrinsic value embedded in large land banks and ongoing project pipelines.
He believes the sector still offers meaningful medium- to long-term opportunity despite near-term moderation in returns. “One should be looking at adding them on dips because they had corrected a lot in the one year,” he said.
He also pointed out that real estate companies with greater exposure to NCR markets may still offer catch-up potential compared to Mumbai-focused developers that have already rallied sharply.
NBFCs Rewarding Strong ExecutionOn non-banking financial companies, Dewan acknowledged lingering concerns around inflation and interest rates, but maintained that stronger players remain well-positioned.
“Some of these stocks, the kind of number they have delivered even in spite of challenges which were there in the last couple of months has been pretty good,” he said.
He singled out Shriram Finance for delivering robust earnings despite macro headwinds.
“Stay with the solid bigger NBFCs, they have the potential to go through these small variations which may happen in the shorter term,” Dewan advised.
