Defence Stocks Remain Attractive Amid Company-Specific Bets, Alpha AMC CEO Says

Market Outlook: Alpha AMC's Rajesh Singla Shares Expert Views

The Indian stock market is expected to experience a consolidation phase, according to Rajesh Singla, CEO and Fund Manager at Alpha AMC. Singla believes that valuations in various pockets, particularly mid and small caps, are no longer cheap, making it unrealistic to expect a straight-line rally from here.

The market has indeed done a fair bit of heavy lifting, with valuations moving ahead of fundamentals in several pockets. As a result, Singla expects selective performance driven by earnings visibility and sector-specific tailwinds, rather than a broad-based rally. For continued growth, both stability in global cues and consistency in domestic earnings growth are necessary.

Market Performance by Sector

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Singla notes that the US-Iran conflict has had an immediate impact on India's growth prospects through crude oil prices. With over 80% of India's oil needs imported, any sustained rise in crude prices will affect inflation, the currency, and corporate profit margins. However, if the situation does not develop into long-term disturbances, the impact will remain cyclical rather than structural.

Impact of US-Iran Conflict on India's Growth

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The IT sector is undergoing a shift due to AI, which is changing the nature of demand. Automation may reduce some traditional services, but it is also creating new opportunities in areas like data, cloud, and digital transformation. As a result, investors should focus on companies investing in AI capabilities, those with strong deal pipelines, and players moving up the value chain.

Approaching the IT Sector

The defence sector remains structurally strong due to government spending, indigenisation, and export opportunities. However, valuations in many defence stocks are now factoring in future growth, making it essential for investors to be far more selective at current valuations.

Defence Sector Outlook

Singla expects Q4 earnings to be steady, but not uniform across sectors. Sectors sensitive to crude, like aviation, paints, logistics, and parts of FMCG, may see margin pressure if oil remains elevated. On the other hand, banking, capital goods, and select manufacturing segments may continue to show resilience.

Q4 Earnings Expectations

In conclusion, Singla advises investors to maintain core exposure to quality listed equities, avoid chasing overvalued pockets, and look beyond public markets for alpha. A lot of value creation is happening before companies become widely tracked in SMEs, pre-IPO businesses, and early-stage sectors.