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Speaking to ET Now, Pandey said India had been grappling with two major challenges. “Overall, our sense is that India was facing two major problems. One, the FPI selling which has been largely linked to the technology-led names. The other was the macroeconomic problem especially coming from crude oil prices.”
With crude prices expected to soften further, he believes one of the biggest macro concerns has now been addressed, creating a positive backdrop for the broader market.
Energy Security Becomes a Long-Term Investment Theme
Pandey identified energy as one of the most compelling long-term opportunities. According to him, recent geopolitical developments have reinforced the importance of securing energy supplies.
“What we are sort of liking from a portfolio perspective is one, the energy-related stocks. This crisis has clearly taught us that energy security is of prime importance, so that is one sector our sense is that for the next 5 to 10 years is going to be the biggest focus area.”
The emphasis on energy security comes at a time when governments and corporations alike are seeking greater resilience in fuel and power supply chains amid global uncertainties.
Defence Opportunity Continues to Expand
Defence remains another preferred sector for Pandey, who sees a multi-decade growth runway supported by rising defence spending and strategic priorities.
“The other is defence because somewhere down the line defence is shaping up very well. It is a ₹40 lakh crore kind of an opportunity spread across multiple platforms.”
He added that recent geopolitical events have highlighted the significance of military preparedness, making defence a structurally attractive investment theme.
BFSI Positioned for Re-Rating
Among large sectors, banking and financial services (BFSI) also feature prominently in his outlook. Expectations of softer inflation, supportive measures from the Reserve Bank of India, and attractive valuations are strengthening the sector’s appeal.
“From a bigger sector perspective BFSI, with the expectation that inflation will come down plus the RBI measures, BFSI is very attractively placed from a valuation perspective and also with the growth inching up.”
According to Pandey, these three sectors—energy, defence and BFSI—currently form the core of his investment strategy.
Crude Beneficiaries Could See Gradual Gains
While the reopening of the Strait of Hormuz is expected to provide relief, Pandey cautioned that the benefits may not be immediate.
“It could take some time because the Strait of Hormuz opening might take a month.”
He noted that several sectors have already absorbed pressure from higher input costs. Automobile companies, for instance, delayed price increases amid hopes of improving conditions, resulting in earnings pressure.
“A lot of sectors, say for example, auto has been sort of withholding price hikes to the extent required, largely because there was a sense that probably some deal might happen.”
While he remains cautious on the information technology sector due to uncertain growth recovery, he believes most other sectors stand to benefit either directly or indirectly from lower crude prices.
Vedanta Aluminium Seen as Key Demerger Opportunity
Discussing opportunities arising from Vedanta’s proposed demerger, Pandey highlighted Vedanta Aluminium as the business investors should monitor closely.
“Our sense is that Vedanta Aluminium is going to take a significant chunk because our sense is that EBITDA for this business could be in the range of say ₹26,000-27,000 crore odd.”
He added that the business was being valued at around six times EBITDA, though there may be scope for higher valuation multiples going forward.
“Overall sense is that Vedanta Aluminium post demerger is the entity to watch out for.”
Pandey also pointed to expansion plans at Hindustan Zinc as another positive development within the group’s portfolio.
Airlines, Commercial Vehicles and Shipping Stand to Gain
Lower crude prices are particularly beneficial for sectors with significant fuel-related costs.
Referring to InterGlobe Aviation, which operates IndiGo, Pandey said the company had been dealing with challenges arising from currency fluctuations and aviation turbine fuel (ATF) costs.
“Two challenges were there. One, if the currency depreciates, it poses a problem for the lease payments what they make. In addition to that obviously the aviation turbine fuel was creating challenges for the company.”
He believes the overall environment has turned favourable for crude-sensitive businesses.
Pandey is especially optimistic about commercial vehicle manufacturers, which face a dual impact from raw material inflation and higher freight expenses.
“It is extremely positive for the CV players because not only they are impacted by the raw material prices… the freight also gets impacted because of the higher diesel prices.”
Shipping companies could also benefit if bunker fuel costs continue to decline alongside crude prices.
HDFC Bank Could Be the Key Market Driver
Within the financial sector, Pandey singled out HDFC Bank as a stock to watch.
“For BFSI, HDFC Bank needs to be watched out for because if they are able to get the chairman and the MD clarity, this stock has seen the maximum decline.”
He noted that foreign investor ownership has fallen significantly and that the bank now trades at a valuation discount to some of its peers.
“If we were to value that about two times on a price-to-book basis, this stock can inch up towards 1,000 and effectively from a Nifty perspective, it has the potential to lift Nifty by 1,000 points.”
With crude concerns easing, policy support remaining intact and valuations appearing attractive in select pockets, Pandey believes the market’s focus is likely to shift from macro uncertainty toward sector-specific opportunities in energy, defence and financials.
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https://economictimes.indiatimes.com/markets/expert-view/falling-crude-prices-shift-market-narrative-energy-defence-and-bfsi-emerge-as-key-bets-pankaj-pandey/articleshow/131737301.cms
