Risk Appetite to Rebound Amid Ongoing Market Volatility: ABSL AMC's A Balasubramanian

Ceasefire in West Asia Eases Pressure on Oil Prices, but Markets Remain Volatile

The recent ceasefire in West Asia has been seen as a step in the right direction, potentially easing pressure on oil prices. However, markets are expected to remain volatile in the near term due to lingering uncertainty, according to Aditya Birla Sun Life AMC's Managing Director and CEO, A. Balasubramanian.

Markets had been on edge due to concerns over the impact of the war on India, particularly through energy prices. The country was seen as one of the most exposed to a prolonged spike in crude prices. If the ceasefire leads to an end to the war, oil prices could move towards the $65–75 range, potentially alleviating concerns over currency and related sectors.

However, the impact of damage to energy infrastructure in the Middle East will take time to reverse. The damage to oil and gas infrastructure could take anywhere between three to six months to heal, according to Balasubramanian. Clearer timelines on recovery would help improve confidence in markets and the economy.

Read also: SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire

Despite the sharp rally following the ceasefire announcement, Balasubramanian expects continued swings in the market. While there has been a significant jump today, volatility is likely to persist for some time, with clearer trends emerging in two to three months.

Geopolitical risks continue to dominate investor sentiment, with earnings and valuations receiving less attention. However, once the situation stabilizes, markets are expected to shift focus back to fundamentals.

In terms of earnings, Balasubramanian expects the current quarter to remain stable, with companies potentially reporting good numbers. Over time, earnings are expected to average around 10–12%.

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

Aditya Birla Sun Life AMC has remained fully invested through the recent turbulence, taking advantage of contra opportunities in sectors such as Oil Marketing Companies (OMCs) and metals. If crude prices stabilize, sectors linked to oil, including autos, OMCs, petrochemicals, fertilizers, and chemicals, could see recovery.

The outlook for India remains steady, supported by improving domestic macro conditions and the Reserve Bank of India's 7.6% GDP projection. Confidence in India's growth remains intact, and once oil prices are no longer a concern, focus will shift back to growth.