Amidst ongoing geopolitical uncertainties and fluctuating global markets, Saurabh Kataria, Head of Equities at Trust Mutual Fund, offers a clear strategy for investors: embrace volatility. He urges market participants not to fear downturns but to view them as strategic opportunities to build long-term portfolios, particularly in high-conviction stocks with substantial growth runways.
Navigating Persistent Market Swings
The financial markets have faced significant headwinds over recent years, from the COVID-19 pandemic to the Russia-Ukraine conflict, US tariff uncertainties, and the current West Asia crisis, including the US war on Iran. This series of global events has fueled persistent volatility, leading to declines in benchmark indices like the BSE Sensex and NSE Nifty 50. Kataria emphasizes that this environment is here to stay, making a long-term perspective crucial for investors.
"The market will react on a daily basis, and you have to use this as an opportunity to increase allocations to something that probably has a 5-, 10- or 15-year runway. You stay on the path and add to your highest conviction," Kataria stressed.
Attractive Valuations Emerge
A silver lining in the current market climate is that valuations, particularly in large-cap and even mid-cap segments, are now more attractive, often sitting below their 5-10 year averages. This presents a compelling entry point for those focused on enduring value. Foreign institutional investors (FIIs) have been significant sellers in 2025 and 2026, but recent data shows a shift, with FIIs becoming net buyers in July, potentially signaling a reassessment of Indian market opportunities.
Historically, periods of muted market returns, especially when corporate earnings remain stable, have often preceded strong recoveries in the subsequent one to two years. Kataria believes that prevailing pessimism surrounding India's growth trajectory, fueled by concerns over AI and commodity price spikes, overlooks the country's consistent long-term potential.
"Good Time to Invest"
With corporate earnings showing stability and valuations becoming more reasonable, Kataria asserts that now is an opportune moment for investment, even for a two-to-three-year horizon. He cautions against waiting indefinitely for further corrections, noting that often, "more money is lost in waiting for corrections than in actual corrections."
Key Investment Themes for Long-Term Growth
Kataria highlights several structural themes poised for significant long-term growth in India:
- Financialisation of Savings: As India's economy matures, a greater proportion of household savings is expected to flow into financial assets, benefiting asset managers, insurers, and related companies.
- Premium Consumption: With rising per capita income, India is anticipated to experience a "J-curve" effect in premium consumption categories, from high-end retail to luxury automobiles.
- Energy Transition: The global shift towards sustainable energy sources will create a long runway for companies involved in renewable power, capital goods, and associated sectors.
Why Underweight on Large-Cap IT?
While bullish on many sectors, Kataria remains underweight on large-cap IT companies. He points to a softening of growth even before the advent of artificial intelligence, partly due to the rise of global capability centers (GCCs) impacting traditional IT service providers. The rapid advancement of AI now poses further questions about the sustainability of even these lower growth rates, making valuations challenging to justify despite appearing cheap.
India's Manufacturing Shift
Looking further ahead, Kataria envisions a significant shift in India's economic structure, moving from a services-oriented model towards a more manufacturing-led economy. This transition, supported by government initiatives like Production-Linked Incentive (PLI) schemes and the 'Make in India' push, represents a profound, albeit long-term, trend that investors should monitor.
In conclusion, Kataria's advice to investors is clear: use market volatility strategically. By focusing on long-term growth themes and high-conviction stocks with attractive valuations, investors can position themselves to capitalize on India's enduring economic expansion, rather than being swayed by short-term market fluctuations.