Indian equity markets continue to demonstrate resilience and offer attractive opportunities, according to Arun Poddar, CEO of Choice International. In a recent exclusive interview, Poddar outlined why domestic liquidity and strategic sector selection are key drivers for investors navigating a landscape marked by geopolitical tensions, crude oil uncertainty, and global volatility.
Domestic Liquidity Fortifies Market Against FII Outflows
Poddar emphasized that robust domestic liquidity has been instrumental in sustaining the Indian market's resilience. Despite foreign portfolio investors (FPIs) being net sellers, offloading a substantial Rs 9.17 lakh crore cumulatively from FY25 to FY27 year-to-date, domestic institutional investors (DIIs) have provided a strong counterbalance. DIIs, primarily driven by mutual funds and consistent SIP flows exceeding Rs 30,000 crore monthly since March 2026, have absorbed over Rs 17.12 lakh crore, stabilizing the equity markets.
However, Poddar cautioned that India's macro fundamentals are not entirely immune to external risks. Potential disruptions in key shipping routes or China's strategic petroleum reserve policies could exert upward pressure on global crude prices. While the current account deficit (CAD) outlook has improved to 1.9% for FY27 with Brent crude averaging $85 per barrel, export growth is partly boosted by a weaker rupee and a re-export model, lacking significant domestic value addition. Furthermore, a contraction in service exports due to AI's impact on IT/BPM, coupled with weak FDI and ongoing FPI outflows, leaves the market susceptible to global shocks if financing gaps are addressed via debt rather than fundamental improvements.
Q1 FY27 Earnings: Standouts and Mixed Performances
The Q1 FY27 earnings season largely met expectations, with several sectors showing strong performance. Autos emerged as a standout, delivering 36.9% revenue and EBITDA growth, driven by strong operating leverage and effective cost control. Capital Goods also surprised positively, beating EBITDA estimates by 11.5% with a 170bps margin surprise. Chemicals and Power sectors showed positive EBITDA beats as well. In contrast, IT reported a mixed performance, with EBITDA surprise mainly from cost optimization rather than revenue growth, while FMCG delivered in-line revenue with a modest EBITDA beat.
Looking ahead, Poddar expects Autos to continue performing well in Q2, buoyed by strong demand, lean inventory, and rising EV penetration. While geopolitical risks persist, their impact on corporate operating performance has been less severe than anticipated, indicating underlying corporate profitability remains more resilient than expected.
Crude Oil, Rupee, and RBI Policy Outlook
The trajectory of Brent Crude prices, oscillating between $85-$100/bbl, and a rupee that has depreciated over 10% year-on-year, remain critical variables. Elevated oil prices and a weaker rupee translate into imported inflation and higher input costs, potentially squeezing corporate margins. Poddar warned that if crude sustains above $90/bbl, it could materially lift non-financial raw material costs, pushing WPI inflation beyond the RBI's comfort zone of 5% and increasing the likelihood of policy tightening towards the end of 2026.
However, he anticipates global geopolitical negotiations and supply responses to limit a sustained crude rally above $100/bbl. A moderation in AI-driven capital allocation globally, combined with lower crude prices, could enhance relative flows into emerging markets, making India an attractive destination for global investors.
Key Sectors for Investment and Caution
Poddar remains constructive on several sectors offering attractive risk-reward opportunities:
- Metals: Especially cost-advantaged aluminum and copper producers, benefiting from elevated global prices and supply disruptions.
- Defence: Still in the early stages of a multi-year investment cycle, with robust order pipelines and increasing indigenization.
- Power Ecosystem: Driven by rising peak electricity demand, necessitating significant investments in generation, transmission, and battery energy storage systems (BESS).
- Pharmaceuticals: Supported by opportunities in complex generics, GLP-1 products, and momentum in the CDMO segment.
- Healthcare: Sustained improvements in occupancy, ARPOB, and cash flows, with strong expansion into Tier-II/III cities.
- Technology (Selective): Preferring new-age companies demonstrating tangible AI monetization and stronger revenue growth over traditional IT services.
- Autos: Exhibiting structural strength from resilient domestic demand, new product launches, and increasing EV penetration.
Conversely, investors should remain cautious on consumer discretionary, upstream oil & gas, and traditional IT services, where earnings expectations may be fully priced in or valuations have significantly outpaced fundamentals.
IPO Momentum and FII Reversal
India's primary market continues to show strong momentum, with Rs 49,000 crore raised across 37 issues in 2026. Poddar noted that pricing discipline, exemplified by companies like Zepto deferring listings due to institutional pushback on valuations, indicates a healthy, self-correcting market rather than exuberance. He sees promise in financial services, profitable consumer-tech, and logistics within the IPO space over the next 12 months.
Regarding FII flows, Poddar highlighted a clear reversal, with outflows narrowing sharply and even turning positive in July. He attributes this to a cooling AI and semiconductor rally in other markets, which diminishes the 'India has no AI play' argument, and the rupee's stabilization due to decisive RBI action. He believes strong DII and SIP flows signal market maturity, assuring FIIs of liquidity for entry and exit, and expects more decisive FII returns once crude prices cool.
Catalysts for H2 2026 and Investor Positioning
Looking to the remainder of 2026, Poddar identified three major catalysts for Indian equities:
- Global Interest Rates: Particularly in the US. A potential rate hike if inflation persists could prompt a response from the RBI.
- Geopolitical Developments: Especially any fresh escalation in the Middle East.
- Commodity Prices: Specifically oil, as it has the most genuine and lasting impact on Indian markets.
Poddar's advice to investors is to avoid timing the market. Instead, he recommends investing in tranches and continuing to buy through corrections, asserting a firmly positive long-term view on India, with expectations of new market highs once oil prices stabilize.