Indian equities stay resilient but high oil prices limit valuation upside, says Sundaram AMC

In an email exchange with Abhishek Kumar, Bharath S, head of equities at Sundaram Asset Management Company, maintained that the structural case for broader Indian market outperformance endures, though the pace may slow while oil prices stay elevated. He noted that the Indian economy has so far absorbed the initial shock of higher energy costs, but a prolonged period of high oil prices could raise inflation, dampen demand and prompt monetary tightening, offsetting last year's tax cuts.

Earnings outside the energy sector are expected to remain solid, and the recent correction reflects valuation adjustments rather than earnings disappointment. He highlighted bottom-up opportunities in mid- and small-cap stocks, manufacturing tied to private capex, and financial services, while staying cautious on global cyclicals. Triggers that could add pressure include de-escalation of the West Asia conflict, a decisive cooling of energy prices, and stable global bond yields. The ongoing Q2 earnings season shows mixed results, with pockets of surprise in industrials and small caps, but some consumer firms lagging.