The market is already pricing in pain
Sharma’s first point of reassurance is valuation. Indian markets have corrected enough to trade below their long-term mean, with forward earnings now sitting at around 17.5 times — a level not seen since the IL&FS crisis and Covid-19 selloff. For most new market participants, this kind of value reset has appeared only once in their trading careers.
“The market has gone a little bit below its long-term mean,” Sharma noted, adding that this creates a cushion for investors willing to be disciplined.
A probability framework, not a prediction
Rather than making a single directional call, Sharma offered a three-scenario probability model tied to how the ongoing conflict and energy disruption resolve.
His base case — assigned a 40–50% probability — is not a full end to the conflict, but a stabilization of global oil trade within two to three weeks. Global inventory buffers of 45 to 60 days are running thin, which he believes will force international pressure toward some resolution in energy flows.
A second scenario, given roughly 40% probability, sees the disruption dragging on for two to three months before easing. Even in this case, Sharma estimates the market’s downside is limited — bottoming near the 20-year mean of around 16 times earnings, which translates to approximately 22,000 on the Nifty, or just 5–7% below current levels.
The tail risk — a prolonged crisis lasting six months or more — is assigned only a 10–15% probability. And even then, Sharma argues that multiple other global economies would face severe stress before India does, citing the country’s relatively strong foreign exchange reserves and moderate exposure to Middle East energy and remittances compared to higher-risk nations.
How to build positions right now
Given this setup, Sharma recommends staggered buying — starting the first round of purchases now where valuation comfort exists, and spacing additional investments over the next four weeks.
The strategic tilt: go domestic. Sectors with limited global exposure offer the best shelter. But for investors looking to generate alpha within that defensive posture, Sharma is making two contrarian bets — IT and real estate.
Why IT, why now?
IT valuations have compressed sharply, with large-cap names now trading around 15 times earnings. Sharma expects earnings commentary in the coming weeks to confirm that, while growth may not be returning quickly, there is no significant further downside to numbers either.
Accenture’s results, which came in better than feared, are an early indicator of the direction of travel. His top picks in the space are HCL Tech, Infosys, and TCS — the large-cap names offering the safest entry point with meaningful valuation support.
Industrials: Energy over exposure
On capital goods and conglomerates, Sharma is broadly positive on the industrial space but maintains a neutral stance on L&T given its Middle East exposure. His overweight picks in the sector are Cummins, NCC, and Siemens Energy — names with a stronger domestic and energy-transition tilt that hold up better in the current environment.
The fuel price flashpoint
On oil marketing companies and pump prices, Sharma is direct: the government can absorb elevated crude for roughly another four weeks through minor tax tweaks, but if prices remain elevated beyond that window, retail fuel price hikes become inevitable — bringing second-order inflation risks with them.