Navigating the Turbulent Market: Shiv Chanani's Strategic Approach for FY26

Introduction

As financial markets enter a new year with high levels of uncertainty, investors are seeking guidance on how to navigate these volatile conditions. Shiv Chanani, a seasoned fund manager at Baroda BNP Paribas Mutual Fund, has outlined a stock-specific approach that emphasizes the importance of near-term earnings visibility. This strategy is crucial in an environment where global events such as tariff tensions and economic slowdowns are impacting market valuations. In this article, we will delve into Chanani's insights on how to identify promising stocks and sectors during these challenging times.

Understanding the Market Outlook for FY26

Shiv Chanani notes that the current operating environment is marked by significant uncertainty, influenced by factors such as global tariff issues and domestic economic developments. Despite these challenges, aggregate valuations have become more reasonable, offering opportunities for selective investment strategies. Chanani emphasizes that markets are likely to remain "bottom-up" and "stock-specific," meaning that investors should focus on companies with clear near-term earnings potential rather than those relying on long-term growth prospects[1][2].

Key Sectors to Watch in FY26

Chanani highlights several sectors that he believes will perform well in the upcoming year:

• Consumption Sector: This space is expected to benefit from recent tax breaks, which will particularly boost discretionary consumption. Consumer durables, in particular, are poised for growth due to their suitability for tax exemptions[1][2].
• Pharma and Healthcare: These sectors are projected to experience steady growth, especially in the domestic market[1][2].
• Select Capital Goods and Power Utilities: These sectors are anticipated to deliver decent earnings growth, driven by their strategic importance in the economy[1][2].

Sectors to Approach with Caution

On the other hand, Chanani advises caution with certain sectors:

• Commodities: This sector is vulnerable to global economic slowdowns, making it a less favorable investment destination during times of uncertainty[1][2].
• IT Sector: While there are long-term growth prospects in IT, especially with technologies like AI, short-term uncertainties related to tariffs and global demand could impact certain companies within this sector[5].

Strategic Stock-Picking in a Volatile Market

In a volatile market, the ability to pick the right stocks is crucial. Here are some strategies that investors can adopt:

• Focus on Near-Term Earnings Visibility: Companies with clear, near-term earnings potential are more likely to outperform those with uncertain or long-term growth stories[4].
• Diversify Across Sectors: While focusing on strong sectors, diversification can help mitigate risks by spreading investments across various industries[3].
• Be Selective Within Sectors: Not all companies within a sector will perform equally well. Identifying those with strong bottom-line growth within sectors like consumer discretionary and healthcare is key[5].

Financial Sector Insights

In the financial sector, technology is becoming a critical differentiator. Banks and NBFCs investing heavily in technology are more likely to outperform their peers. With the financial sector undergoing significant changes, choosing the right financial stocks requires careful analysis of their technological capabilities[4].

Earnings Expectations for Q4 FY25

Shiv Chanani forecasts that the overall earnings growth for the Nifty 50 companies could be in the low single digits for Q4 FY25. However, sectors like telecom, metals, consumer discretionary, and healthcare are expected to post healthy double-digit growth. On the other hand, sectors such as oil & gas and cement may see a decline in earnings year-over-year[5].

Economic Factors Influencing FY26 Outlook

The Indian economy is expected to benefit from recent tax cuts, which could boost discretionary consumption and support overall economic growth. However, global economic uncertainties due to tariff tensions and potential slowdowns remain significant risks for FY26[5].

Conclusion

As investors navigate the complex and volatile market conditions of FY26, Shiv Chanani's stock-specific approach offers valuable insights for making strategic investment decisions. By focusing on sectors with strong near-term earnings potential and being cautious about sectors with high volatility, investors can better protect and grow their portfolios. With the right strategy, investors can find opportunities for growth even in uncertain times.

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Key Takeaways:

• Stock-Specific Approach: Focus on companies with near-term earnings visibility.
• Sector Preferences: Consumption, pharma, and select capital goods sectors are promising.
• Caution Zones: Commodities and certain export-oriented sectors are risky.
• Technological Advantage: Banks and NBFCs with strong tech capabilities are attractive.

By adopting a bottom-up, stock-specific strategy and keeping an eye on macroeconomic trends, investors can navigate the challenges of FY26 effectively and capitalize on emerging opportunities.