India's equity markets are navigating a challenging period, marked by their longest weekly losing streak in 25 years recently. Despite a rebound, the BSE Sensex and NSE Nifty 50 remain among the worst performers globally this year, down nearly 15% and 14% respectively, as of October 9, 2026.
Global Pressures Weigh on Dalal Street
Souvik Biswas, head of research at Bajaj Capital, describes the current market as being in a "risk-off" mode. He attributes this downturn primarily to external factors:
- Oil Prices: Renewed increases in crude oil prices, fueled by elusive US-Iran truce signs, strain government finances.
- Geopolitical Tensions: Global instability continues to dampen investor sentiment.
- FPI Outflows: Foreign Portfolio Investors (FPIs) have significantly divested from Indian equities, offloading Rs 31,282 crore in the current month alone (as of October 8), contributing to year-to-date outflows exceeding Rs 2.91 lakh crore.
- Rupee Weakness & US Bond Yields: Surging US bond yields have exacerbated FPI selling pressures and weakened the Indian rupee.
Biswas emphasized India's vulnerability to these global issues, particularly in an "AI-led disruptive world" where the nation is still establishing its presence.
Investment Strategy in a 'Stock-Picker's Market'
Biswas does not foresee a "dramatic resetting of expectations" or major market improvement this year, citing the need for stability in global conditions. However, he identifies this as a "stock-picker's market," where selective investment can yield returns.
Attractive Sectors Identified
For investors seeking value, Biswas points to sectors demonstrating clear capital expenditure, earnings visibility, and growth potential:
- Manufacturing
- Healthcare
- Renewables
He also notes the role of domestic resilience and opportunities in new-age sectors and exports as balancing factors against global risks.
Advice for Retail Investors
For retail investors, especially those utilizing SIPs, Biswas advocates a "portfolio approach" over a product-centric one. He advises selectivity regarding portfolio risks and suggests considering hybrid products and arbitrage-type funds for added protection during uncertain times.
Mid-Caps, Small-Caps, and Large-Caps
Biswas anticipates that any market turnaround will likely be led by the mid-cap and small-cap segments. However, he cautions investors to be mindful of valuations in these areas. While large-cap segments traditionally offer a lower but more predictable earnings profile, their predictability is currently impacted by macroeconomic conditions. Key large-cap sectors like IT, oil marketing, and banking have also underperformed.
"Valuation comfort is greatest in the large-cap segment. However, when viewed in relation to growth potential, the mid-cap and small-cap segments also appear quite reasonable," Biswas stated, adding that near-term uncertainty persists unless energy prices stabilize.
Considering Bonds for Conservative Investors
Conservative investors should view bonds as a source of fixed income, particularly to lock in higher yields at this market stage. Biswas recommends accessing higher-yielding AA-rated issues and holding them until maturity, while cautioning about limited liquidity in the secondary bond market. He advises against investing in issues rated below A+.
Disclaimer: This article provides market analysis for informational purposes only and should not be construed as investment advice. Consult a qualified financial advisor before making investment decisions.