Navigating Market Volatility: Spark Capital’s Devang Mehta on Investment Strategies

Amidst heightened global volatility fueled by geopolitical tensions in the Middle East and surging crude oil prices, equity markets worldwide have experienced significant swings. While the uncertain macroeconomic environment has unsettled investors, corrections across various sectors have presented selective opportunities. Devang Mehta, Deputy Managing Director &amp. CIO – Equity NDPMS at Spark Capital Private Wealth, suggests a focus on domestic-focused sectors and disciplined investing during this period.

Geopolitical Risks and Market Impact

The escalation of conflict involving the U.S. And Israel with Iran, and the potential closure of the Strait of Hormuz, have triggered a “risk-off” environment. This has resulted in declines in global indices and a surge in crude oil prices, exceeding $100–$110 per barrel, alongside foreign outflows. Disruption to roughly 20% of global oil supplies transiting the Strait of Hormuz has raised concerns about sustained high oil prices.

Sectoral Opportunities Post-Correction

Mehta highlights that sectors with strong domestic focus and limited global exposure are particularly attractive in the current climate. He recommends focusing on capital expenditure-oriented sectors such as power, HVDC, engineering, capital goods, and infrastructure. Discretionary consumption-related sectors like auto and auto components, which have experienced meaningful corrections, also present accumulation opportunities. Niche pharmaceuticals, wellness, hospital businesses, and select BFSI companies are also identified as potential long-term investments.

Indian Market Outlook: Decent, Bad, and Ugly

Despite the current volatility, Mehta remains optimistic about the long-term prospects for the Indian market. He points to several positive factors:

• Earnings Rebound: India Inc. Is expected to see around a 15% year-over-year earnings rebound over FY26–FY27.
• Valuation Compression: India’s valuation premium over other emerging markets is compressing, potentially attracting foreign capital in 2026.
• Strong SIP Flows: Consistent inflows from Systematic Investment Plans (SIPs) and retail participation continue to provide a cushion against foreign investor volatility.
• Benign Inflation: Headline CPI inflation printed at 2.75% in January 2026, although a new series makes historical comparisons difficult.
• Pro-Growth Measures: Recent income tax and GST rate cuts, along with interest rate reductions (a 125 bps cut to 5.25% as of early 2026), aim to stimulate consumption.

Still, Mehta also cautions about potential headwinds:

• Rupee Weakness: The Indian Rupee has recently fallen to all-time lows, exceeding ₹92.35 against the US Dollar, potentially increasing imported inflation.
• FPI Outflows: Foreign Institutional Investors have been net sellers, offloading over ₹32,800 crore in the first week of March 2026.
• Geopolitical Escalation: A major escalation in the Middle East, such as a shutdown of the Hormuz Strait, could push oil prices to unsustainable levels, severely impacting the Indian economy.

FPI Flows and FDI Shifts

Foreign Portfolio Investors (FPIs) were substantial net sellers in India during 2025, driven by valuation concerns, US tariff anxieties, and a preference for Chinese investments. While FPIs briefly turned net buyers in February 2026 following a US-India trade deal, this reversed in March due to escalating Middle East conflicts and a weakening rupee.

India has begun relaxing Foreign Direct Investment (FDI) norms, including a 60-day fast-track approval process, to attract manufacturing investment. This represents a shift from the 2020 restrictions, allowing Chinese capital to enter critical industries. This policy change aims to bridge the investment gap and boost local manufacturing, balancing security concerns with economic growth necessities. The relaxation of Press Note 3 (2020), which had previously restricted Chinese investment, signals a move towards calibrated engagement.

Rupee Volatility and Economic Impact

The Indian Rupee (INR) has weakened past the 92 level, driven by geopolitical tensions, rising crude oil prices, and foreign capital outflows. The rupee is expected to trade in a 90–93 range as long as geopolitical tensions persist and oil prices remain high. A weaker rupee increases the cost of imported goods, contributing to domestic inflation and widening the current account deficit.

Crude Oil Prices and Macroeconomic Stability

Sustained crude oil prices above $100/bbl pose risks to India’s macroeconomic stability, potentially widening the current account deficit, increasing inflation by 35–40 bps, and reducing FY27 GDP growth to around 6%. While India’s strong foreign exchange reserves (around $720 billion) and potential for a shorter-duration shock may mitigate long-term damage, a sustained high oil price trend requires a rebalancing of portfolios towards defensive assets.

Investor Strategy: Patience and Discipline

For investors aged 30-40, Mehta advises maintaining a long-term perspective and continuing SIPs to take advantage of lower prices during volatile periods. He emphasizes the importance of asset allocation aligned with risk profile, liquidity requirements, and life goals. He cautions against panic selling, attempting to time the market, and waiting for the “perfect” entry point.

Key Takeaways:

• Focus on domestic-focused sectors like power, infrastructure, and auto.
• Maintain SIPs and a long-term investment horizon.
• Avoid panic selling and market timing.
• Be aware of geopolitical risks and their potential impact on the Indian economy.

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