According to him, while labour code-related adjustments may not have a material long-term impact if companies are able to pass on incremental costs, the larger concern remains weak global demand. Prolonged softness in international business and muted domestic hiring could also start weighing on consumer demand, particularly in discretionary categories.
Valuations still rich, opportunities selective
Tandon cautioned that despite recent volatility, Indian equity markets are not cheap. With benchmark indices still trading around 20–22 times earnings, valuations have not corrected meaningfully. The pain has largely been confined to the broader market, which had seen a sharp rally earlier. As a result, investors need to be selective and focus on sectoral rotation rather than broad-based buying.
He sees relative value emerging in capital goods and industrials—segments that have underperformed for several years—rather than in sectors that have already seen substantial re-rating.
Metals in a sweet spot, but governance matters
On metals, Tandon said the sector is currently benefiting from firm commodity prices, which should translate into near-term earnings strength. Companies such as Vedanta stand to gain as long as prices remain supportive, though he flagged that shareholder returns will ultimately depend on corporate governance and capital allocation decisions.
Realty best played via financiers
Despite a sharp pullback in real estate stocks, Tandon prefers indirect exposure to the sector. He reiterated that housing finance companies offer a more attractive and relatively lower-risk way to play real estate compared with developers themselves.
PSU banks still offer some upside
On public sector banks, Tandon said the easy valuation upside is largely behind, with most stocks now trading close to long-term averages. However, cleaner balance sheets could allow PSU banks to sustain relatively higher credit growth compared with smaller private banks and NBFCs, especially in a softer deposit-rate environment. While merger-related disruptions could weigh on management focus, he believes PSU banks still offer reasonable risk-reward in a market with limited opportunities.
Life insurance a long-term story
Tandon remains constructive on life insurance, highlighting the long growth runway in India. Despite concerns around margins, he said penetration remains low, policy sizes are small, and protection products are still under-represented. Holding a basket of leading life insurers, in his view, could deliver meaningful wealth creation over the next 5–10 years.
Budget unlikely to provide tax cheer
Expectations from the Union Budget remain muted. Tandon said a cut in capital gains tax is the only measure that could meaningfully lift sentiment, but he does not expect such a move given fiscal constraints. With limited scope to raise revenues further, the Budget is likely to focus more on signalling rather than offering material tax relief.
Oil: Refiners face risks if crude rises
While refining margins have been strong, Tandon warned that rising crude prices could hurt refiners going forward, as price pass-through may be limited in the current economic cycle. If oil prices stay elevated, upstream producers such as ONGC and Indian Oil Corporation could benefit initially, though government intervention via windfall taxes could cap upside.
Overall, Tandon advises investors to stay cautious, focus on sector-specific opportunities, and avoid assuming a broad-based earnings recovery in the near term.