Nifty 50 and Sensex have declined around 9% in the past month, with some episodes of value buying appearing during the sharp selloff. This came as the war in the oil-rich Middle East broke out after the US and Israel killed Iran’s then supreme leader, Ayatollah Ali Khamenei, sparking massive retaliation from Tehran. The rising hostilities led to the prolonged closure of the Strait of Hormuz, triggering a rally in oil prices.
Indian equity markets entered March amid heightened volatility following geopolitical tensions in the Middle East and the resulting increase in crude oil prices. While such developments may create short-term uncertainty across financial markets, India’s underlying macroeconomic fundamentals remain relatively resilient, said PL Wealth, the wealth management arm of PL Capital (Prabhudas Lilladher), in its ‘Market Outlook – March 2026’ report.
Domestic growth continues to be supported by strong consumption demand, government-led infrastructure spending and improving balance sheets across corporates and financial institutions, the firm said, adding that corporate earnings growth remains healthy across several sectors, although revisions have been uneven, indicating that market performance may increasingly become stock-specific.
“In the near term, markets may remain sensitive to global developments and commodity price movements. However, India’s structural growth drivers – including the infrastructure investment cycle, financial sector expansion and rising domestic consumption – continue to support a constructive long-term outlook for equities,” PL Wealth said.
Market valuation elevated, but…
The domestic wealth management company said that Indian equity valuations remain above long-term historical averages when compared to several emerging markets. “While valuations in certain segments of the market appear elevated, improving earnings growth and strong domestic participation continue to support overall market stability,” PL Wealth said.
“Periods of volatility may therefore create opportunities to accumulate fundamentally strong companies at more attractive valuations,” the report further read.
How to position your portfolio?
Amid the ongoing market environment, portfolios should focus on sectors with strong earnings visibility and structural growth drivers, according to PL Wealth. Financials and infrastructure remain core portfolio allocations due to their strong earnings outlook and direct exposure to India’s economic growth, it added.“Selective exposure to consumption-oriented companies and high-quality industrial businesses can provide additional growth opportunities. Defensive sectors such as healthcare and utilities can help stabilise portfolios during periods of heightened market volatility,” it further said, adding that maintaining diversification across sectors and asset classes remains important for managing portfolio risk.
Short-term outlook (0-6 months)
In the near term, PL Wealth feels that markets may remain range-bound as investors assess geopolitical developments and global macro conditions. “A cautious approach with gradual deployment of capital is advisable. Large-cap equity mutual funds and diversified flexi-cap strategies can provide stability during periods of volatility. PMS focused on quality compounders (large cap growth or defensive growth mandates),” it said.
The wealth management company also advised maintaining some allocation to gold as it may help hedge portfolios against geopolitical risks. “For a defensive/moderate risk-taking investor, allocation to BAF (balance advantage funds) is recommended. These BAFs give good stability during volatile markets with the presence of debt in their portfolio,” it added.
Also read: Rs 18,900 crore wiped off! IDBI Bank shares tumbles 19% in 2 days on divestment jitters
Medium-term outlook (6-24 months)
Over the medium term, PL Wealth expects improving corporate earnings and continued infrastructure spending to support market performance. “As the investment cycle strengthens, sectors such as financials, infrastructure and industrials may benefit,” it added.
Investors may look at diversified equity mutual funds, flexi-cap funds and gradual accumulation in mid-cap funds (selective), large and midcap hybrid funds along with infrastructure sector funds, manufacturing or industrial thematic funds, the wealth management company said. Category III AIFs and PMS targeting capex/capital-goods plays may provide opportunities for investors to participate in earnings growth. “An investor can even explore the MLD opportunities to reap short-term benefits,” it said.
Long-term outlook (24-60 months)
Despite the ongoing uncertainties, India’s structural growth story remains compelling over the long term, according to PL Wealth. “Rising consumption, expanding financial markets, digital transformation and infrastructure development are expected to support sustained economic growth,” it said.
Equities are expected to be the primary wealth creation asset class over the long term, and investors may consider maintaining core allocations through diversified equity mutual funds while selectively using long-term holdings in flexi-cap, large mid and small cap funds, index funds for core allocation, PL Wealth said.
“PMS for concentrated alpha; Category II/III AIFs (private credit, growth equity) for accredited investors. Gold and silver can continue to play a role as diversification assets within long-term portfolios,” it added.
Sectoral outlook
PL Wealth also highlighted the outlook for each of the sectors. For financials, the company said that they remain one of the most important drivers of India’s equity market. Strong credit growth, improving asset quality and rising financial penetration continue to support earnings visibility across banks and financial institutions, it added.
Infrastructure and capital goods companies are benefiting from strong government spending and improving private sector investment, PL Wealth said, adding that the ongoing capex cycle is expected to support sustained earnings growth across engineering and construction companies.
For automobiles, PL Wealth sees the sector continuing to benefit from domestic demand, premiumization trends and improving export opportunities. Rural demand recovery and product innovation are expected to support the sector’s growth outlook.
Consumer-oriented sectors remain structurally attractive due to rising incomes, urbanization and expanding consumption patterns, and companies with strong brands and pricing power are likely to maintain stable earnings growth despite near-term cost pressures, the wealth management company added.
It however noted that the IT sector is currently undergoing structural change driven by artificial intelligence and digital transformation. “While global technology spending cycles may create short-term uncertainty, long-term demand for digital services remains intact,” it added.
PL Capital cautioned that metals and commodities remain cyclical and sensitive to global economic conditions, although the metal companies have benefited from improving global commodity conditions and operating leverage.
Also read: Iran war deepens correction risk: Is Nifty headed toward 21,000 zone?
“Energy and utilities companies continue to provide relatively stable earnings visibility. Rising energy demand and continued investment in renewable energy projects support the sector’s long-term outlook…The healthcare sector offers defensive characteristics during periods of market volatility and continues to benefit from both domestic demand and export opportunities,” it added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)