Short-term geopolitical jitters may pause market, but earnings will regain focus: Nischal Maheshwari

Synopsis

Market expert Nischal Maheshwari suggests the market might pause briefly. It will then focus on earnings. Defence stocks are gaining traction due to order wins and positive sentiment. Maheshwari advises caution on defence stocks for long-term investments. He believes the market isn't currently pricing in a major geopolitical escalation. Historically, markets have shown resilience after initial reactions to geopolitical events.

"If that is a kind of situation, market is just maybe take a breather for a few days and then go ahead looking at the earnings and everything else. So, that is the situation at the moment," says Nischal Maheshwari, Market Expert.

Defence stocks, they are back in the fray. Lot of order wins as well and now sentimentally too you are seeing a tilt towards these names. What are your thoughts?
Nischal Maheshwari: Yes, given the geopolitical situation, we are having this kind of a trade there. But having said that, last especially in March there were a lot of orders which have gone out to all these companies and partially that is also getting reflected.

These stocks had underperformed for some time initially, and sort of a catch-up game, but at these prices once again the valuations are going to now start looking pretty expensive for most of them. So, you need to be cautious. Yes, it is a good trade, but for long-term buying this is not the point.

Are markets really worried about the geopolitical tensions? What are markets pricing in, I mean is this something which is a real risk per se or markets are saying it is time to move on?
Nischal Maheshwari: See, the situation at the moment I do not think so market is pricing in a very big escalation. So, as we go along and if there the escalations are much higher than expectation, then you might see market reacting negatively.

But historically, we have seen that after the initial few days we have seen in Ukraine war or even during the earlier skirmishes which India and Pakistan had, I do not think the market reacted very negatively except for a few initial days because there was never any escalation beyond a point.

So, if that is a kind of situation, market is just maybe take a breather for a few days and then go ahead looking at the earnings and everything else. So, that is the situation at the moment.

...moreless

...moreless