War causes panic in market, but correction could open buying opportunities: Sunny Aggarwal

A sharp correction in some frontline stocks amid geopolitical tensions and rising crude oil prices could create picky opportunities for long-term investors, even as markets grapple with uncertainty around inflation, growth and global energy prices.

Talking to ET Now, Sunny Aggarwal of SBI Cap Securities said the recent sell-off in many large-cap names appears to be driven more by panic and worst-case assumptions rather than deterioration in business fundamentals.

An example is the reaction of companies with exposure to the Middle East, where investors cause prolonged disruption of projects and economic activity. “There is absolute panic on a stock basis that the company has got 25% to 30% exposure to the Middle East, and the market is discounting the entire order book of 25% to 30% exposure that will not materialize over the next 6 to 24 months,” he said.

However, Aggarwal believes that the market can extrapolate extreme situations. If geopolitical tensions ease in the coming months, investors may return to more normal assumptions about project implementation timelines and business growth.

He pointed out that the underlying order pipeline remains strong for some companies despite the recent volatility. “Looking at a very strong order book of close to Rs 4.3 trillion and also 30% contribution from the private sector, it clearly shows that private sector capital is also picking up,” he said.

With the sharp correction in valuations along with the broader market, the risk-reward for long-term investors is starting to improve. After the correction, now the valuation has also become comfortable… we think the fair value of the business is Rs. 4,000-4,200 is close. Therefore, any decline currently is a good buying opportunity for long-term investors.

Even in the consumer internet space, increasing competition and temporary disruptions have weighed on sentiment, but the broader growth story remains intact. “After the correction, there too we think the risk-reward is getting favourable. In fact, both these stocks, Eternal as well as Swiggy, look very attractive as the long-term growth opportunity is very intact,” he said.

At the macro level, crude oil remains a key variable for India’s economic outlook. Elevated energy prices could trigger inflationary pressures across the economy if they persist for several months. “If crude continues to trade above $90 and in the band of 90 to 110 for a prolonged period of three to six months, it will definitely have an inflationary effect across the value chain, first for the producer and then for the consumer,” Agarwal said.

However, he noted that India has been experiencing relatively low inflation since last year, which could provide some relief if energy prices remain volatile.

In banking, Agarwal said valuations have also become reasonable after the recent correction. “After the reform, most private banks are now trading at fairly fair valuations,” he said, adding that a mix of private and well-diversified public sector banks could help investors navigate the current environment.

As markets digest geopolitical risks and commodity volatility, Aggarwal believes the current phase of panic may gradually give way to selective opportunities for investors willing to take a long-term view.

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