Macro worries cloud markets, but domestic fundamentals offer cushion: Sandip Sabharwal

The Indian market may be grappling with rising global uncertainty, elevated crude oil prices, and currency weakness, but market expert Sandip Sabharwal believes domestic corporate fundamentals are still providing a degree of stability beneath the volatility.

Speaking to ET Now, Sabharwal said that while global headlines are creating discomfort for investors, the underlying performance of Indian companies continues to remain relatively resilient.

Bharti-Prudential Deal Seen as Positive for the Group
Commenting on the recent developments involving Bharti Enterprises and Prudential plc, Sabharwal viewed the transaction positively, especially from the perspective of foreign capital inflows.“It is a positive deal because of the fact that any FDI coming in in a big way is always positive,” he said.

He added that insurance businesses require continuous capital support to sustain growth and expansion, making such investments beneficial from a long-term strategic standpoint.

Discussing the implications for ICICI Prudential Life Insurance and the asset management business, Sabharwal said the businesses are already operating smoothly and are unlikely to face disruption.

“Yes, so those businesses as such are on autopilot now and ICICI is a large group. So, from their perspective putting in capital is not so difficult,” he said.

According to him, continuity in operations is unlikely to be affected because both the life insurance and asset management businesses are performing reasonably well.

Oil Spike and Iran Conflict Remain Key Market Risks
Turning to the broader market environment, Sabharwal acknowledged that macroeconomic concerns are beginning to overshadow otherwise healthy corporate commentary.

“Yes, so that is what we have been discussing over the last few days that micro-wise from what the companies are saying how they are performing, etc, things look okay,” he said.

However, he cautioned that the ongoing Iran conflict and the resulting spike in crude oil prices are becoming major concerns for global markets.

“With the macro perspective, top-down this kind of stalemate in the Iran war where now oil inventories are at levels where every day’s disruption potentially leads to a further spike is becoming something of a concern,” Sabharwal noted.

Brent crude hovering around the $111 mark and persistent geopolitical uncertainty are weighing heavily on investor sentiment. Still, he suggested that the strong operational performance of Indian corporates could offer some downside protection to domestic equities.

India Still Among the Weakest Major Markets This Year
Addressing concerns that Indian markets may have rebounded too quickly from March lows, Sabharwal argued that the rally should be viewed in context.

“But you need to realise that first the Indian markets fell and then they rose, so effectively YTD if you see India is still the worst large size market,” he said.

He pointed out that several global and emerging markets have delivered significantly better returns this year, meaning India has underperformed in relative terms despite the recent rebound.

Sabharwal also indicated that some global capital could rotate out of expensive technology stocks into markets like India. However, he cautioned that elevated crude oil prices remain India’s biggest macro vulnerability.

“The fact of the matter today is that if crude oil persists at these levels or even spikes higher, on a macro basis India is significantly hurt more than many other economies,” he said.

IT Sector May See Tactical Recovery
On the information technology sector, Sabharwal said the recent fall in the rupee and a global shift away from richly valued AI stocks could trigger a short-term rebound in beaten-down IT counters.

“Not longer term, but as a reversal, like sort of mean reversal trade it is possible IT performs,” he said.

According to him, investors globally are beginning to rotate into cheaper software stocks for tactical opportunities rather than long-term strategic bets.

“So, there is a reasonable possibility that we could have some upside in the beaten down IT sector, which would depending on how the overall market does range between 10% to 15% also,” he added.

Vodafone Idea Still Faces Structural Challenges
Despite some recent optimism surrounding Vodafone Idea, Sabharwal remained unconvinced about its long-term competitive position against rivals like Bharti Airtel and Reliance Jio.

“Subscriber lost are not going to come back to them and their debt even after all this relief and equity infusion remains at levels where they are unlikely to report net profits anytime in the next five years,” he said.

He described the stock’s movement as largely speculative and argued that the company’s effective equity value remains negligible.

On the other hand, Sabharwal maintained a constructive long-term outlook on Bharti Airtel, citing restructuring efforts, merger activity, and capital inflows into the group’s insurance business as positives.

“Longer term it should continue to do well,” he said.

Private Banks Likely to Retain Leadership Over PSU Banks
Discussing the banking sector, Sabharwal said the outperformance phase for public sector banks may have largely played out after disappointing earnings from State Bank of India.

“Yes, I think so because the biggest challenge for PSU banks is garnering deposits at a time where most of the younger generation is actually moving towards private sector banks,” he said.

He explained that deposit mobilisation remains critical for long-term banking performance, and this shift in customer preference is putting pressure on the net interest margins of PSU banks.

While valuations remain reasonable and asset quality has improved, Sabharwal believes private banks are better positioned once the sector emerges from the current weak patch.