ETMarkets Smart Talk | Crude, monsoon hold the key to market direction in H2 2025: Bay Capital’s Nikunj Doshi

As Indian equities navigate through global volatility and domestic shifts, Nikunj Doshi, Managing Partner and CIO-PMS at Bay Capital Investment Advisors, shares his insights on what lies ahead for investors in the second half of 2025.

In an exclusive conversation with ETMarkets Smart Talk, Doshi highlights how two key domestic variables—crude oil prices and the progress of the monsoon—will be pivotal in shaping market sentiment and corporate earnings.

He also sheds light on emerging sectoral opportunities, the evolving role of India in global portfolios, and why patient investors should stay focused despite short-term noise. Edited Excerpts –

Q) Thanks for taking the time out. While May closed on a strong note, June saw some volatility — from a long-term perspective, do you see geopolitical concerns having a sustained impact on market sentiment?

A) Geopolitical concerns do carry an economic impact — particularly in terms of supply chain disruptions, commodity price fluctuations, and global risk-off sentiment.

However, whether these concerns will leave a lasting impact on investor sentiment depends on the scale, duration, and economic implications of the event.

Historically, we’ve seen that events like the Gulf War, the Southeast Asian crisis, 9/11, the Global Financial Crisis, or even the Covid-19 pandemic have triggered sharp short-term corrections, but they eventually opened up some of the best investment opportunities for long-term investors.

Volatility caused by such crises often creates value dislocations in quality businesses, which can be capitalised on with a patient, long-term view.

Q) As we are about to end 1H2025, what are your expectations or assumptions for the rest of the year?

A) Looking ahead to H2 2025, the outlook for Indian equities will hinge primarily on two domestic variables — crude oil prices and the progress of the monsoon.

These factors have a direct bearing on inflation, rural consumption, and macroeconomic stability. If crude remains within manageable levels and we have a normal monsoon, then business sentiment should stay robust.

In that scenario, we foresee an improvement in demand conditions, further margin stabilisation, and consequently, an upward revision in corporate earnings for FY27. That would likely lend strong support to equity markets over the medium term.

Q) Are there any new or existing themes that are likely to do well in 2H2025?
A) Besides defence (which we don’t invest) we see opportunities in consumption, digital first businesses and financial services sectors.

Q) Geopolitical concerns weighed on crude oil in the past few weeks. How do you see crude oil moving in the near future and what could be the possible impact on earnings and GDP growth?
A) Crude oil remains a critical macro variable for India due to our import dependency. A $10 increase per barrel typically raises the current account deficit (CAD) by 0.3% of GDP.

That said, India’s current external position is relatively comfortable, and any spike in crude may not derail the macro outlook unless it’s prolonged or very steep.

If ongoing tariff negotiations with the US conclude smoothly, and global trade channels remain functional, the economy should be able to absorb moderate crude increases without significant pressure on earnings or GDP growth.

Q) In terms of valuation comfort – which sectors are on your radar?
A) As mentioned earlier we see opportunities in consumption, digital first businesses and financial services sectors. Our focus is on business leadership, large TAM and corporate governance besides the financial parameters.

While overall market valuations do look high, but there are many stocks available at attractive valuations if one looks bottom up.

Q) How are FIIs looking at India amid falling interest rates globally?
A) We see India becoming core portfolio allocation for global funds rather than being clubbed with other emerging markets. India is now the fourth largest economy with much better growth outlook, we this happening sooner than later.

With India now being the fourth-largest economy and delivering consistent growth, the country stands out for its macro stability, reform momentum, and consumption-led growth model.

Q) If someone plans to allocate say Rs 10 lakh (30-40 years) in 2H2025 – should they put fresh money to work? What is the ideal asset allocation?
A) Asset allocation call depends on individual priorities. For first-time investors, we recommend starting with mutual funds — either via SIPs or STPs — to average out volatility.

Diversification across asset classes like equity, debt, and gold is also advisable depending on one’s financial milestones and income stability.

Q) How is the rate trajectory looking from the RBI? Do you think the front-loaded 50 bps cut was enough to boost consumption?
A) The RBI’s decision to front-load a 50 basis points cut, along with efforts to infuse liquidity, was a prudent move given the evolving global and domestic macro backdrop. Alongside the tax reliefs announced in the previous Union Budget and a cooling inflation trajectory, these policy measures should help improve household sentiment and consumption demand in the near term.

The RBI will likely now adopt a wait-and-watch approach to assess how businesses and consumers respond to these monetary and fiscal measures before making further rate decisions.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)