Markets will need to adapt to persistent volatility, says HDFC Securities MD & CEO

Markets have been volatile recently amid persistent global macro risks and tariff uncertainties. How can investors navigate through these times?

Concerns about reciprocal tariffs and global macroeconomic risks remain prevalent and will continue to create periodic market volatility. We believe these uncertainties will persist for a considerable period, and investors will need to adapt to this environment of persistent uncertainty.

 How do you view the current market valuations—are we back to high valuations, or do you see scope for further upside supported by earnings growth?

The aggregate earnings of Nifty companies are expected to grow by 12 per cent and 15 per cent in FY26 and FY27, respectively. Indian markets are trading at 22x FY26 consensus earnings, near the higher end of their range over the last few years. Recent initiatives by the government and the RBI will likely sustain economic growth and support markets at higher levels. We believe markets are positioned to move higher this financial year, with Nifty 50 heading towards previous highs of 26,200 points and beyond.

What sectors or themes do you believe will drive the next leg of economic growth?

The cement industry is experiencing robust growth, with demand forecast to expand at an 8 per cent CAGR through 2027, driven by strong infrastructure spending and housing demand. The sector is undergoing an unprecedented consolidation phase, as major players have aggressively acquired over 65 million tonnes of capacity in recent years, significantly enhancing their market reach, operational scale, and pricing power.

Conversely, which sectors may remain under pressure amid current macro uncertainties?

Large IT services companies reported a sequential revenue decline in constant currency terms due to sharp declines in the manufacturing and retail verticals. IT service companies face significant headwinds from escalating tariff wars and trade tensions, which threaten to disrupt cross-border operations and increase costs for companies heavily reliant on global delivery models and H-1B visa programs. The rapid advancement of artificial intelligence also poses an existential challenge to traditional IT services business models, as it threatens to replace routine coding, testing and maintenance tasks that form the backbone of many service contracts. We remain cautious about this sector.

 Foreign investors have remained sellers so far; do you anticipate their absence for the rest of the year?

The dominance of the ‘Magnificent Seven’ technology stocks, which previously attracted enormous global capital flows and drove much of the US market’s outperformance, appears to be waning as investors reassess their concentrated exposure to these mega-cap growth names. Growing valuation concerns, regulatory scrutiny, and the sustainability of their exceptional growth rates are prompting a strategic reallocation away from these previously dominant market leaders. Investors are also actively seeking diversification opportunities beyond the US to reduce portfolio concentration risk and capitalise on attractive valuations in international markets that have lagged behind US equity performance. The weakening US dollar due to the escalating concerns over America’s mounting debt burden and fiscal sustainability creates additional incentives for USD-based investors to explore offshore opportunities. A depreciating dollar erodes the relative attractiveness of US assets and enhances the appeal of foreign investments when converted back to dollars. Emerging markets, particularly India, are positioned as primary beneficiaries of this capital reallocation as they offer compelling growth prospects, improved corporate governance and attractive valuations relative to developed markets. India’s robust economic fundamentals, expanding market capitalisation and increasing inclusion in global indices make it an attractive destination for investors seeking alternatives to US market exposure.

What impact do you see on the market from the Reserve Bank of India’s (RBI) liquidity injection through the 50-bps interest rate cut and 100-bps reduction in the cash reserve ratio in the medium term?

A jumbo rate cut and a surprise 100 bps cut in CRR by the RBI in its recent policy are excellent relief to the market. By November, the RBI would unleash roughly ₹2.5 trillion of liquidity in the system. This should help enrich and sustain the growth momentum and facilitate private investments. This is likely to provide much-needed impetus to the Indian markets.

Several recent regulatory changes, such as F&O tightening, true-to-label and basic demat accounts, have hurt stockbrokers’ margins. How is the broking industry, especially HDFC Securities, coping with these changes and margin pressures?

We are in a relatively better position to withstand recent regulatory changes, as our business model is well diversified and our concentration and reliance on derivative business is significantly lower than some other brokers. We had no negative impact due to true-to-label charges, as we were already charging customers what was changed by stock exchanges without keeping any margins.

How is HDFC Securities, as a traditional broking service, competing with discount brokers, who currently command retail and derivatives volumes?

Beyond strengthening its traditional business and digital platforms, such as InvestRight, HDFC Securities has launched HDFC Sky to compete directly with discount brokers .HDFC Sky is a new, all-in-one digital trading and investment platform from HDFC Securities, designed for beginners and experienced investors. With competitive flat brokerage fees and 12 per cent p.a. interest on MTF, it offers diverse investment options, including stocks, mutual funds, ETFs, F&O and US equities. Sky emphasises a user-friendly interface, advanced charting tools, expert research and features like multi-order execution, aiming to simplify and enhance the trading experience.