When asked whether this is a time to buy dips or sell on rallies, Dharmesh Kant from Cholamandalam Securities acknowledged the complexity of the current environment.
Speaking with ET Now, he said, “Yes, definitely it is a very difficult market to negotiate with from the trading perspective and it is anybody’s guess how this market will swing because one tweet, one statement here and there by Mr. Trump, who is the lead factor in this geopolitical situation, can decide the turn of markets anyways.”
Despite the near-term uncertainty, Kant believes valuations are beginning to reflect a fair degree of realism. He outlined a scenario-based framework for the Nifty, suggesting that under a base case—where geopolitical tensions ease within three to six months—the index could find balance in the 21,500–22,500 range.
“As far as valuations are concerned, markets are now fairly priced in. So, I will give you three scenarios which we have been working with and we recently released a report on that. So, 1230–1240 is what has been our EPS estimate for FY26 assuming there is zero growth for FY27, which is again around 1230–1240. So even if you discount that at 17 times or 18 times PE multiple one year forward, so 21,500 to 22,500 is where it should be fairly balanced assuming that this war gets over in next three to six months’ time frame.”
However, the downside risks remain tangible. In a more adverse scenario, he cautions that the Nifty could slip towards the 19,500–20,000 zone, implying further corrections in broader markets.
“Worst-case scenario which we have built in for the Nifty is the same number on 16 times that is anywhere around 19,680. So, 19,500 to 20,000 level. So, 10% more from here, stocks may correct 20–25%.”Given this backdrop, Kant’s advice to investors is clear: focus on quality and adopt a staggered investment approach rather than attempting to time the market.
“So, the advice to investors is get into quality stocks, do a staggered manner of buying approach.”
Sectoral View: Defence Stands Out, Autos and Metals Selectively Attractive
Kant highlighted defence as a relatively insulated sector in the current climate, supported by strong order books and long-term structural tailwinds.
“Defence is a clear play which is very much insulated from all this impact.”
Automobiles, while potentially exposed to short-term headwinds, continue to show resilience backed by strong quarterly numbers. Metals, too, present selective opportunities for investors willing to navigate cyclicality.
“Automobiles may be impacted a little bit, but again the numbers of Q4 were very strong, so there also nibbling can help. Metal is another space where one can help nibbling.”
IT: A Trading Bet, Not a Structural Call
The recent uptick in IT stocks, according to Kant, should be viewed more as a tactical move rather than a fundamental shift.
“I mean, IT is more of a trading bounce and a flight to safety kind of approach.”
He pointed to factors such as currency depreciation and expectations of improved management commentary as near-term triggers. However, structural concerns—particularly around AI-led disruption—continue to cloud the long-term outlook.
“Most of the IT companies have utilised the cash in the balance sheet to acquire some AI companies and have done some collaboration with AI companies out there. So, some light on that front… if that leads to area where our growth can be in higher of mid-single digit, at least in the near term it can be 6–7%, then definitely there is a good value buying at current levels for most of the IT companies.”
That said, his firm remains cautious on the sector.
“But we as a house we are totally staying away from them and our sense is that it will be more of filling the gaps which were created by existing orders not getting renewed… and it will be replaced by AI-enabled software… So, how this settles is very difficult to call it now from investment perspective.”
Defence: Strong Fundamentals, Patience Required
On defence PSUs, Kant reiterated his long-term bullish stance, even as price performance has lagged over the past year.
“Yes, I mean defence is a tricky place. They are loaded with huge order book and we have been fairly bullish on them for last two-three years. However, last one year the price action has been largely negative for most of the companies barring BEL which was the only outlier in the space.”
He emphasised that while smaller companies face scale challenges, the sector overall remains structurally strong, backed by robust order inflows.
“Structurally we think this is a very nice space to be in which is fully insulated from whatever is going on in the geopolitical space or in the outside world and the order books keep on swelling.”
For investors seeking relatively stable cash flows, certain names stand out.
“If you are looking for a cash cow kind of a company, BEL is in place because it supplies components and equipment which are used on a month-on-month basis.”
However, patience is key, especially for companies with longer execution cycles.
“HAL… it may take some time and some of the shipbuilding companies like Mazagon Dock and all. So, if somebody is willing to wait for three-four years and put in money and be patient about it, then the valuations have corrected quite a bit and these are very attractive… zone to deploy your investment money.”
Kant’s top picks in the space remain unchanged.
“The top three picks I would reiterate, it remains BEL, HAL, and Mazagon Dock.”
The Bottom Line
With volatility likely to persist and macro triggers dominating sentiment, the market may remain directionless in the near term. For investors, the strategy appears less about timing the bottom and more about disciplined accumulation.
As Kant summed it up, the coming weeks could be crucial.
“Very difficult to decide where the market will go but my sense is if next week this continues, then we are in for sharper downside movement on Nifty, maybe 7% to 8% immediately.”