“No Bull, no bear—it’s a kangaroo market,” says Nilesh Shah amid global uncertainty

The Indian stock market has staged a notable recovery from its March lows, with benchmark indices climbing roughly 7% and mid- and small-cap stocks outperforming even more sharply. Yet, beneath the surface of this rebound lies a sense of unease. Recent volatility—particularly late last week—has reminded investors that momentum can shift quickly.

Market participants are now navigating what Nilesh Shah, MD, Kotak AMC describes as a “kangaroo market”—one that leaps unpredictably in response to global and domestic events rather than following a clear upward or downward trend.

“So, as someone mentioned, this is neither a bull market nor a bear market; it is a kangaroo market. It goes up and down based on events which are happening,” Shah said. “And I still do not think events are behind us.”

Global Risks Still Loom

A key factor influencing sentiment is the ongoing uncertainty in West Asia. While markets have stabilized in the absence of immediate escalations, underlying risks remain.

“For us, four things matter—safety of 9 million Indians in the Middle East; second, the remittance flow of $50 billion; third, availability of energy… and finally, it is the price of the oil,” Shah noted.

India’s heavy reliance on energy imports—particularly through the Strait of Hormuz—continues to pose a structural vulnerability. Oil prices, currently $20–30 higher than budget assumptions, could weigh on the economy if elevated levels persist.

“If this is a short-term phenomenon, there will be pain, but we will have the ability to bear it. But if it continues… then there will be impact,” he added.

Valuations and “Froth” Concerns
Despite the recovery, Shah cautioned that the market is “neither cheap nor expensive,” urging investors to remain selective.

Rather than pointing to specific sectors, he emphasized a broader theme: adaptability.

“In IT, for example, we are seeing midcaps are more nimble in leveraging AI… On the other hand, some of the large companies are not that nimble,” he said. “I will call it lack of innovation, lack of preparedness for the future… that will differentiate winners and losers.”

This pattern extends beyond technology. In consumer goods, smaller, niche players are gaining ground by responding quickly to changing preferences, while larger firms struggle to keep pace with innovation.

AI Disruption: Threat or Opportunity?
Artificial intelligence remains a central topic for investors, particularly in the IT sector. While some fear disruption, Shah views the evolution as part of a longer trajectory.

“I would like them to remember what mutual funds advertise: past performance is no guarantee of future performance,” he said. “AI is just a journey. However, at this point of time, we are not very sure which way things will move.”

He outlined three possible pathways: the development of secure domestic large language models, the rise of application-layer innovation by startups, and the expansion of enterprise AI—potentially a market as large as the current IT services industry.

“Enterprise AI could be as large a market as current IT services company,” he said, while noting that agility may favor mid-sized firms over industry giants.

Sectoral Outlook: Stock Picking Over Broad Bets
In sectors like pharmaceuticals and automobiles, Shah advocated a bottom-up approach.

Healthcare, particularly hospitals, stands to benefit from rising incomes and increased spending. Meanwhile, pharmaceutical companies may need to shift toward branded generics and stronger integration strategies.

In the auto sector, demand remains latent.

“We believe after the current uncertainty is over, we will see a smart recovery in auto purchases,” he said, adding that fuel prices will be a decisive factor.

No Safe Haven, Only Strategy
When asked about safe investment options, Shah was unequivocal.

“There is no safe haven in this market. It is your psychology—how you react to the events,” he said.

He contrasted disciplined investors—those using systematic investment plans—with those attempting to time the market, often unsuccessfully.

“If that is your psychology, then this whole market is safe haven,” he added, referring to long-term, moderate-return expectations.

Beyond Equities: Diversification in Focus
With equities facing headwinds, alternative asset classes are gaining attention.

Shah highlighted performing credit AIFs, which are filling a financing gap left by traditional institutions, as well as new mutual fund structures like Special Investment Funds (SIFs), which allow for long-short strategies.

Gold, too, remains in favor.
“We believe [central banks] will continue to buy… gold could deliver double digit return this year,” he said.

However, he does not expect dramatic outperformance from any single asset class, instead predicting convergence in returns across equities, gold, and alternatives.

Pain Ahead for the Real Economy
While markets have so far absorbed geopolitical shocks, the broader economy may soon feel the strain.

“Undoubtedly,” Shah said when asked about potential near-term pain. “As of today, bulk of the pain has been borne by oil marketing companies… The consumers, by and large, have been spared.”

That dynamic, he warned, is unlikely to last.

“We believe over a period of time this burden will be shared with consumers, with industrial sector, with government,” he said.

Beyond oil, disruptions are spreading across supply chains—from fertilizers to industrial gases—raising concerns about sustained cost pressures.

“We think… at least till September 26 we will see lingering impact of this crisis,” he said, citing infrastructure damage and supply constraints.