Market volatility before Budget may be a buying chance: banks, consumers key bets: Pankaj Murarka

As Indian equity markets experience heightened volatility ahead of the upcoming budget, investment experts suggest that the current market conditions present attractive entry points for long-term investors, particularly in banking and consumer sectors.

Talking to ET Now, Pankaj Murarka, Chief Investment Officer at Renaissance Investment Managers, shared his insights on navigating the current market environment characterized by persistent foreign institutional investor (FII) selling and global geopolitical uncertainties.

Market outlook: Short-term volatility vs. long-term fundamentals

According to Murarka, recent market movements have created what he describes as "a perfect capitulation in mid and smallcap" segments, presenting opportunities for patient investors to acquire quality companies at more attractive valuations than previously available.


Despite near-term nervousness driven by continuous FII selling and the approaching budget announcement, Murarka emphasized that India's fundamental economic story remains robust. The country continues to demonstrate resilience as a 7% growth economy with improving earnings prospects.

"After last year's slow earnings growth, we are getting back to a stage where we think the index will deliver approximately 12% earnings growth going into the next year," Murarka noted. He added that valuations have normalized following a 12-month period of market underperformance.

Investment strategy: Accumulation over trading

For traders, Murarka advised caution, suggesting they remain on the sidelines until clearer market trends emerge. However, for investors with a longer time horizon, he recommended using market drawdowns as accumulation opportunities.

"Any sign of these kind of panics or drawdowns that they see in the market, they should go and buy into good companies," Murarka stated, emphasizing the distinction between short-term trading and long-term investing strategies.

Sector focus: Banking and consumer stocks show promise

When asked about specific sectors offering value, Murarka highlighted two key areas:

Banking Sector: The investment chief expressed confidence in banks, citing strong balance sheet quality and early indicators of credit growth recovery. Recent earnings reports from sector leaders have been encouraging, positioning banks favorably for the year ahead.

Consumer Sector: Murarka remains optimistic about consumer stocks, pointing to significant government stimulus infused into the economy last year. He anticipates increased rural spending in the forthcoming budget, which could provide additional economic support.

The consumer sector has experienced a two-year period of underperformance, leading to normalized valuations that now present attractive entry points for investors seeking exposure to India's consumption story.

Budget impact and market positioning

With the budget approximately ten days away, market participants are exhibiting caution. However, Murarka's analysis suggests that this pre-budget uncertainty, combined with normalized valuations and improving earnings growth prospects, creates a favorable risk-reward scenario for disciplined investors.

The combination of structural economic strength, anticipated government spending on rural development, and sector-specific improvements in banking and consumption categories forms the basis of Murarka's constructive medium to long-term outlook on Indian equities.