Healthcare, Financials & Infra: Expert Advice for Navigating Market Volatility | ETMarkets Smart Talk

Market Volatility Creates Opportunities in Healthcare, Infrastructure, and Financials: Axis Max Life’s Sachin Bajaj

Recent geopolitical tensions and a surge in crude oil prices have triggered a broad market correction, but Axis Max Life Insurance’s Chief Investment Officer, Sachin Bajaj, sees this as a potential entry point for long-term investors. Bajaj highlights healthcare, infrastructure, and financials as sectors now trading at more reasonable valuations following the downturn. His assessment, part of the ETMarkets Smart Talk series, emphasizes a constructive outlook on India’s structural growth story despite near-term uncertainties.

The volatility stems from a confluence of factors, notably the impact of geopolitical events on energy markets. The war in Ukraine, in particular, has driven up crude oil prices and disrupted gas supplies, increasing input costs for numerous industries and compressing margins. Whereas acknowledging these short-term macroeconomic headwinds, Bajaj views the current situation as a temporary disruption rather than a fundamental breakdown of India’s growth trajectory. Domestic demand, policy reforms, and consistent domestic investment flows remain key drivers, though markets are likely to remain sensitive to energy price fluctuations in the immediate future.

IT Sector Correction and Broader Market Impact

The technology sector has faced significant headwinds, with stocks correcting due to concerns about slowing growth and the potential disruption from artificial intelligence. Year-to-date, IT stocks have underperformed the broader Nifty50 index by 13%, according to Bajaj. However, the recent market correction has extended beyond IT, impacting other sectors as rising crude and gas prices affect input costs and profitability.

India’s vulnerability to oil price shocks is particularly acute, given its substantial import dependence. Historically, Indian markets have experienced volatility when crude oil prices exceed $80-$90 per barrel. Sustained prices at these levels could impact inflation, the current account deficit (CAD), fiscal stability, and corporate earnings. Bloomberg reports that Indian insurers are increasingly using state bond derivatives as yields climb, a move potentially linked to navigating this economic landscape.

Despite these challenges, Bajaj anticipates a rebound in corporate earnings growth in fiscal year 2027, following two years of single-digit growth. However, elevated commodity prices and potential gas shortages could lead to downward revisions of earnings estimates for FY27.

Good, Bad, and Ugly Scenarios for Indian Markets

Bajaj outlines several potential scenarios for the Indian market in the near term, heavily contingent on the resolution of the ongoing geopolitical conflict and its impact on global energy prices. A swift ceasefire and stabilization of energy markets would be a positive catalyst, leading to lower commodity prices and reduced macroeconomic pressure. Conversely, sustained oil prices above $100 per barrel and continued disruption to global energy supplies could weigh on corporate margins and earnings.

A prolonged conflict could trigger outflows from foreign portfolio investors (FPIs), further pressure corporate earnings – particularly in energy-intensive sectors – and potentially dampen domestic investment flows, intensifying market volatility. The Economic Times notes that Sachin Bajaj recommends focusing on quality opportunities emerging from the correction.

FPI and FDI Trends

Bajaj differentiates between the narratives surrounding FPI (Foreign Portfolio Investment) and FDI (Foreign Direct Investment). FPI outflows have been driven by factors such as capital rotation towards AI-focused themes, relatively high Indian market valuations, earnings slowdowns, and, more recently, rising oil prices and geopolitical developments.

However, FDI is expected to improve due to India’s strong macroeconomic fundamentals, policy reforms, and robust domestic demand. The recent trade agreement between India and the United States is also seen as a positive development, boosting prospects for FDI inflows.

Rupee Volatility and its Impact

The Indian rupee has been weakening, largely due to the global backdrop of higher crude oil prices, FPI outflows, and a strengthening US dollar. Bajaj anticipates continued volatility and a potential downward bias in the near term if crude oil prices remain elevated. A weaker rupee benefits export-oriented sectors like IT, pharmaceuticals, and gems and jewelry, but it also raises imported inflation and increases input costs for the broader economy. Moneycontrol reports on the AI disruption impacting IT services and its potential financial consequences.

Crude Oil Prices and Macroeconomic Stability

The recent increase in global oil prices, from a range of $65-$70 per barrel to around $100 per barrel, represents a significant macroeconomic headwind for India, given its heavy reliance on oil imports. While high crude prices could spark short-term market volatility and strain the macro narrative, Bajaj believes India’s macroeconomic framework – ample foreign exchange reserves (covering 11 months of imports), ongoing fiscal consolidation, and resilient domestic demand – is markedly stronger than during past oil shocks.

Investor Advice: Staying Invested Amid Volatility

Bajaj advises investors to avoid panic selling amid short-term volatility driven by oil shocks and to remain invested in quality assets to capture long-term upside. He points to policy reforms, accelerating credit growth, and government initiatives – such as GST and income tax cuts – as factors expected to boost consumption in the coming year.

Investors should focus on opportunities in sectors like healthcare, pharmaceuticals, select consumer discretionary goods, infrastructure, financials, and select automotive companies. The key takeaway is to view the current market correction as a potential opportunity to accumulate quality assets for the long term, rather than a signal to exit the market.