Deploy 25% of capital now, accumulate banks and NBFCs: Devarsh Vakil on navigating the crude oil crisis

Indian markets have been rocked by a confluence of forces: geopolitical conflict disrupting Hormuz supply routes, crude oil prices surging, and a weakening rupee. In an interview with ET Now, Devarsh Vakil, Head of Prime Research at HDFC Securities, cut through the noise with a clear tactical framework — stay defensive in the short term, but begin deploying capital methodically.

"The good news and good prices never go together," Vakil said. "Right now everything is looking gloomy, but these are the opportunities the market offers us for investing for the longer term."

The macro picture: crude oil is the swing factor

At the heart of the current correction is a single variable: crude oil. Sustained high prices raise input costs economy-wide, widen India's current account deficit, and stoke inflationary pressure — a triple threat that markets are now pricing in. Should oil prices remain elevated for an extended period, Vakil warns of "widespread earning downgrades" across the Nifty universe.

Before the current crisis erupted on February 28, Nifty was trading around the 25,000 level with earnings growth expectations of 16–17%. In a worst-case scenario where the conflict drags on, that growth estimate could compress to just 11–12%, implying an aggregate Nifty EPS of 1,230–1,240 for FY26.

Geopolitical timeline: the April 6 deadline

Feb 28

Geopolitical uncertainty intensifies. Hormuz supply disruptions begin. OMC under-recoveries mount sharply.

Mid-March

Rupee depreciates ~5% from pre-crisis levels. Forced margin call liquidations hit exchanges — Rs 1,400 crore unwound on March 23, Rs 1,000 crore on March 24.

March 28

Donald Trump announces a 10-day pause on strikes against Iran's infrastructure. Markets get a brief window of relief.

April 6 — deadline

If a truce is reached, Vakil expects a market rebound. If conflict extends, earnings vulnerability increases materially.

OMCs: Government steps in — a buying signal?

The government's decision to cut excise duties on fuel — without passing the benefit to end consumers — is a direct lifeline to oil marketing companies. With OMCs losing an estimated Rs 24 per litre on petrol and Rs 30 per litre on diesel, the move shores up their financials and credit ratings. Vakil reads this as a meaningful policy signal: "From a longer-term investor perspective, these steps are actually giving us some kind of hope that the worst seems to be getting over for oil marketing companies."

"Earlier, when crude oil prices fell, they absorbed all the gains. Now they are reducing duties to support the oil marketing companies, says Vakil.

Sector playbook: where to hide, what to accumulate

Largecaps: L&T, Reliance and Coal India flagged as attractive

Among the large-cap casualties of the current sell-off, Vakil specifically flagged L&T as "quite attractive at this moment," with Reliance and Coal India also under active coverage and viewed positively. He noted that a significant part of the current selling is technical — margin calls and forced liquidations rather than fundamental de-rating. Once these positions clear out over the next few sessions, the path opens for a recovery.

InterGlobe Aviation (IndiGo), down sharply from its highs, faces its own specific pressures from elevated fuel costs — but even there, Vakil's broader framework applies: forced selling creates entry points for those with patience and dry powder.

The bottom line: deploy 25%, keep dry powder

Vakil's advice to investors sitting on cash is direct: start deploying approximately 25% of idle capital at current levels. Not all at once — the remaining 75% should be held back as dry powder to absorb further volatility and capture potentially better entry points if the conflict drags on past April 6.

The strategy separates into two tracks. In the short term, play defensives — IT (for rupee tailwinds), pharma, defence, and upstream energy. For the medium term, the bigger opportunity lies in accumulating rate-sensitive sectors — banks, NBFCs, auto, and real estate — which will benefit most when geopolitical tensions ease, crude cools, and rate-cut expectations return.