Despite Global Uncertainty, India’s Benchmark Indices Remain Resilient

Bonanza Portfolio Ltd, a leading financial services firm, has been closely tracking market trends amid global uncertainties. With India’s benchmark indices showing resilience, Achin Goel, Vice President, Bonanza Portfolio Ltd, shares insights on how Trump’s tariff policies, foreign institutional investor (FII) movements, and crude price fluctuations are influencing the market.

“Trump's tariff plans have sparked fears of a global trade war, significantly impacting IT stocks,” says Achin Goel in an exclusive interaction with Bizz Buzz. While FIIs have withdrawn over Rs 30,000 crore, domestic investors have stepped in with Rs 6,000 crore, providing market stability. A weakening dollar and favorable crude prices further ease concerns.

As India’s GDP is projected to grow between 6.5 to 7 per cent in FY26, Goel highlights key investment opportunities in manufacturing, infrastructure, and renewable energy while emphasizing the role of government policies in shaping market recovery

How are global factors like Trump tariffs, the strong dollar, FII exits, and the crude price dip influencing India’s stock market?

India's benchmark indices have resilience despite rising global uncertainties. Trump's tariff plans have triggered concerns of a global trade war, significantly impacting IT stocks. Foreign institutional investors continue selling, with outflows reaching Rs. 30,015 crores in early March, with funds redirecting to outperforming Chinese markets. The strengthening dollar index traditionally drives capital toward US assets, though recent moderation provides relief. Positive factors supporting the market include declining crude oil prices, which benefit India as a major importer; domestic institutional investors providing stability by infusing Rs 6,000 crores; and moderated valuations following corrections. All eyes are on the US Federal Reserve's upcoming policy decision on March 19, with rates expected to remain at 4.25-4.50 per cent. While global trade tensions persist, improved domestic earnings potential in upcoming quarters could enhance market stability.

With the dollar’s decline and potential market corrections, where do you see the biggest investment opportunities for Indian investors?

As the dollar continues to decline, reaching a five-month low against major currencies along with potential market correction, investors can consider several promising investment opportunities in the current scenario. Recent decline of the US dollar has a positive impact on FIIs activities as weaker dollar makes investments in emerging markets like India more attractive to foreign investors. Weaker dollar is generally seen as favorable for attracting FIIs flows into high-growth sectors. Manufacturing sector is expected to be major beneficiary of India's PLI schemes, with companies in electronics manufacturing, pharmaceuticals and auto components likely to see sustained growth as India positions itself as an alternative to China in global supply chains. Infrastructure sector can be another promising sector looking at government's continued emphasis on capital expenditure. Companies engaged in construction, cement and capital goods will benefit from increased government spending on roads, railways and urban development projects. Renewable energy sector also has good growth potential as India is focused on shifting toward cleaner energy sources, with solar, wind and green hydrogen companies poised to make the most of favourable policy frameworks.

What is your outlook for the Indian stock market in the coming financial year, and what key factors will drive market movements?

India's GDP is projected to grow between 6.5 per cent and 7.0 per cent in FY26, driven by robust domestic demand and increased government spending. Potential interest rate cuts could further stimulate economic activity, enhancing market performance. The Union Budget's focus on capital expenditure and reforms will significantly influence investor sentiment. However, geopolitical tensions and U.S. trade policies pose notable risks. Current market valuations are considered reasonable, supporting potential growth. Key sectors expected to drive growth include banking, consumption (white goods and travel), and pharma. The RBI's substantial liquidity injection should improve deposit growth and stabilize NIMs, bolstering optimism in the banking sector. Additionally, the US generic pricing environment is stabilizing, and India's CDMO sector is poised for secular growth due to the "China plus one" strategy. As earnings growth accelerates, market sentiment is likely to improve, leading to an upward trend

Given the current policy changes and geopolitical shifts, which sectors do you see as bullish, and what’s driving their growth?

As we navigate through 2025, several sectors stand out as particularly bullish, driven by a combination of domestic policy initiatives, geopolitical shifts, and changing global economic patterns. The pharmaceutical industry benefits from both government support and international supply chain realignments. The defense sector is expanding on the back of increased government spending and strategic priorities. Green energy, particularly nuclear power, is receiving substantial policy support. The metals sector is responding positively to global economic stimulus measures, while the strengthening USIndia relationship creates opportunities across multiple industries. For investors seeking to capitalize on these trends, a strategic approach might involve balanced exposure to these bullish sectors while monitoring the evolving policy landscape and geopolitical developments that could further shape their trajectories in the coming months.

Are you considering portfolio diversification, and if so, which sectors do you see as promising additions?

We always believe and advise our client for portfolio diversification in term of different market caps as well as in various sectors to mitigate the risk. We expect the Indian economy is poised for robust growth in 2025, driven by sectors such as automobile, renewable energy, pharmaceuticals and infrastructure. The automobile sector is expected to do well due to revival in consumer demand especially rural and new launches. Renewable energy is another key area, with India aiming to achieve significant non-fossil fuel capacity by 2030 whereas pharmaceutical sector benefits from government incentives and rising healthcare demands and infrastructure sector is expected to be in radar led by urbanization and housing needs.

Additionally, sectors like electric vehicles (EVs), real estate and FMCG are also emerged as good investment opportunity. The EV market is showing fast growth led by government subsidies and technological advancements, while real estate benefits from urban expansion and sustainable development. FMCG sector is also poised for growth due to rising consumer incomes and lifestyle changes.

When do you expect the market to recover, and what key factors or events could drive this improvement?

We expect Indian equity market to see gradual recovery from early H2CY25. A recent market forecast predicts that Nifty 50 may experience an uptick of ~6 per cent to approximately 24,000 mark by mid-year, driven by easing monetary policy and healthy domestic consumption. Major factors behind this growth includes anticipated rate cuts by RBI, robust fiscal budget for infrastructure and recent tax reforms aimed at boosting consumer demand. Furthermore, DIIs have also played a crucial part in stabilizing market offsetting foreign outflows. We anticipate consumer discretionary sector to report improved corporate earnings starting new financial year, while financial sector is expected to witness corporate growth from late CY25. India’s trade deficit shrinks to its lowest level in over three years, bolstering market sentiments, further GDP growth rebound to 6.2 per cent in Q3FY25, and decline in retail inflation supporting the rally.

Can you share insights into your multi-cap fund strategy and how it has performed in the current financial year?

Multicap funds offer diversification across different market capitalizations, which can help to mitigate risk. This diversification allows investors to participate in the potential growth of companies of all sizes. Bonanza Multicap fund pursues long-term capital appreciation by employing a diversified strategy - GARP. It seeks companies with strong growth potential that are currently available at reasonable valuations. This involves identifying businesses poised for high growth while ensuring their stock prices reflect a justified valuation. The fund's investment process combines a top-down and bottom-up approach. A top-down analysis assesses macroeconomic trends and sector outlooks to identify promising areas. Subsequently, a bottom-up approach scrutinizes individual companies within those sectors, evaluating their financial health, management quality, and competitive advantages. This fund focuses on identifying small companies with lasting MOATs (competitive advantages). Regarding performance on a longer time horizon, Bonanza Multicap fund have delivered 23 per cent and 28 per cent over 3- and 5-year period respectively, as on February 2025.