“Oil shock is a direct hit to India’s external balance”Addressing the macro impact of rising crude, Mookim said the transmission mechanism is both direct and significant.
“At every $10 increase in oil prices, it increases our CAD by about $15 to $16 billion annualised. And oil prices are up far more than $10 now. The economy feels the impact of this in a very major way. The prices in most cases have not yet been passed on to consumers. The government or government companies are bearing a large part of the oil increase cost to the economy.”
He added that policy nudges to reduce consumption are, in his view, a response to an unusually prolonged disruption.
“It makes sense for the economy to try and mitigate the impact because frankly this war seems to have lasted much longer than anybody had originally imagined. Everybody, at least in the equity markets, if you see how stocks have behaved since, has believed that this is over and we are going to be back and open the whole thing very soon, but the uncertainty still prevails.”
Markets and the surprise factor: Was PM Modi’s appeal priced in?On whether equity markets had anticipated such explicit policy communication, Mookim pointed to a two-layered uncertainty framework.“There are two steps to this. One, of course, is the physical reopening of the shipping channel and hopefully we all would agree that this cannot continue. The impact on global supply chains and energy availability is so severe that it is difficult to imagine that three or six months down the line the strait is still closed.”However, he stressed that the more important variable is post-shock oil pricing.“But the second question is more relevant… even if oil prices were to stay in that $85–90 corridor, and there is a scenario that even after the strait reopening it may not come down to the 70s or 60s in a hurry, even then there is a big drain from the Indian economy. Even then you may need to pass on to consumers a little bit of a price increase.”
He added that policy action—both fiscal and monetary—becomes more likely the longer the disruption continues.
Earnings outlook: Q1 FY27 could feel the pressureOn corporate earnings, Mookim drew a distinction between short-lived Q4 impact and more visible Q1 stress.“The Q4 earnings were impacted only for about three weeks in the quarter. So it is difficult to say that we expected much dent to numbers in Q4. In many cases companies have reported better than expectations nevertheless.”
However, he warned that the next quarter could tell a different story.
“The challenge still remains for Q1 because the impact of not just the lack of energy and higher energy costs will show up more in this quarter, but also the fact that demand in many cases is tapering off.”
He highlighted the risk of demand deferral across consumption-linked sectors:
“If you are building, let us say, an apartment, would you want to lock in a high price of commodities now? You are likely to see demand issues also.”
Importantly, he cautioned against extrapolating index strength into broad economic resilience.
“I would not extrapolate the strength of numbers… to say all is well. The largecaps will actually fare better. If you are looking for Nifty index outlook, I do not think that will get damaged much. It will be the broader market and economy which will feel a bigger impact.”
FIIs staying away: “Relative growth is the only framework that matters”On sustained foreign investor underweighting in India, Mookim pointed to global allocation logic driven by growth differentials.
“The framework that works well is the relative growth argument. If you look at long-term performance of equity markets or flows of capital, they tend to move very nicely with relative growth outlooks.”
He noted that India is currently losing out on that metric.
“You have questions on Indian growth and Indian growth numbers have to be downgraded whereas growth other places of the world are looking better—Korea, Taiwan, North Asia, tech and the US.”
According to him, cheaper valuations alone are not enough to attract flows.
“You may argue that the currency is cheaper, that assets have become cheaper, but that is not sufficient in itself. The growth dynamic has to improve relatively.”
IT and AI trade: high uncertainty, low convictionOn the debate around AI-driven disruption in the IT sector, Mookim struck a cautious tone, citing the lack of clarity on outcomes.
“The problem with Indian IT or AI is that there are several scenarios we can paint with sufficient credibility. I can make a case saying concerns are overdone, and I can also make a case that these businesses will be particularly hampered and damaged.”
He admitted the absence of a clear directional view.
“The problem we currently face is we do not know the right answer. There is a complete lack of conviction in this space. It is then difficult to put a lot of capital in these stocks at the moment.”
Themes vs valuations: Power story strong, but expensiveOn sectoral positioning, Mookim acknowledged the structural strength of the power theme but flagged valuation risk.“As a theme it makes sense—not just the fact that you need power to do AI and transformers and data warehouse-related stuff—but also because the Indian grid needs to evolve and renewable energy is now very credible.”However, he cautioned:
“The real question is which stocks benefit and have we started to overpay for some of these. As a theme it makes a lot of sense, but valuations are not cheap.”
He reiterated a broader preference for largecaps over midcaps in the current environment.
Capex and consumption: Limited upside in a weak macro phaseOn the capex cycle, Mookim was unequivocal that the post-Covid surge is unlikely to repeat. “Is there enough momentum in private sector capex to take up the slack? I do not see in the current environment that is going to happen. Capex momentum is going to stagnate.”
He also flagged potential pressure on consumption due to inflation and weaker sentiment.
“Consumer durables may come under pressure because inflation is going to rise, and consumer confidence may be dented by what is going on.”
Bottom line: defensives back in focusIn a more uncertain macro regime, Mookim concluded that traditional defensive sectors regain relevance.“In a weaker environment, the three sectors that have tended to outperform always historically in India are staples, healthcare, and IT.”
As global oil dynamics, policy responses, and growth divergence continue to shape flows, the Indian market narrative appears to be shifting from momentum-led participation to cautious, quality-driven allocation.
