Equitree CIO Views West Asia Crisis Jitters as Opportunity for Strategic Portfolio Enhancement

India's Businesses Remain Resilient Amid West Asia Crisis

The West Asia crisis has had a significant impact on global markets, but India's businesses have shown remarkable resilience. According to Pawan Bharaddia, Co-founder and CIO of Equitree Capital, the earnings engine of Indian businesses remains intact, despite the current discomfort caused by the crisis.

The macroeconomic indicators support this view. India's GDP grew 7.8 percent in the December quarter, and the March GST crossed Rs 2 trillion, indicating a strong demand for goods and services.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Domestic Demand-Driven Businesses Remain Confident

Businesses driven by domestic demand, such as consumption, capex, and financials, are confident about their future prospects. These sectors are less affected by the West Asia crisis, which has impacted businesses reliant on imported energy or the rupee. The Indian rupee has reached record lows, with Brent crude above $100.

Chemicals Sector Shows Signs of a Comeback

Pawan Bharaddia has observed signs of a comeback in the chemicals sector. Destocking has largely played out, and restocking is now visible. The evolving US tariff environment is pushing global buyers to diversify away from China toward India. However, the recovery is uneven and has to be played one business at a time.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Private Banks and IT Services Segment Face Challenges

The fundamentals of private banks are healthy, with stabilising margins, asset quality at its best in a decade, and credit growth reviving towards low-teens. However, valuations are not compelling, and the large private banks are reasonably valued and very widely owned.

The IT services segment faces challenges, with growth slipping to low single digits and a disruption risk from AI. The cash flows and dividends are still strong, but the question of what these businesses will look like five years out cannot be confidently answered.

Transmission and Distribution Segment Offers Strong Earnings Visibility

The transmission and distribution segment within the power sector offers strong earnings visibility, with a capex runway of close to Rs 9 trillion through 2032. This is driven by renewable evacuation, grid strengthening, HVDC, and exports. The softer ordering in FY26 is a temporary bandwidth issue and not a change in the structural story.

Key Takeaways

India's businesses remain resilient amid the West Asia crisis, with the earnings engine intact and the discomfort caused by the crisis likely to be temporary.

Domestic demand-driven businesses remain confident about their future prospects.

The chemicals sector shows signs of a comeback, but the recovery is uneven and has to be played one business at a time.

Private banks face challenges, with valuations not compelling and a disruption risk from AI.

The transmission and distribution segment offers strong earnings visibility, with a capex runway of close to Rs 9 trillion through 2032.