Why are investors cautious even though stock valuations look cheaper? Expert answers

Stock markets may look directionless right now, but experts say global uncertainty and constant sector shifts are the main reasons behind the volatility. Abhishek Basumallick of Shree Rama Managers said recent geopolitical tensions and cautious investor sentiment have kept markets moving within a narrow range rather than trending strongly upward.

Basumallick said frequent geopolitical developments are affecting confidence. “There is a sense of risk aversion right now across the world,” he noted, adding that ongoing tensions in different regions are making investors more careful about taking long-term bets.

He also pointed out that despite conflicts in oil-producing regions, crude prices have not surged sharply. “A couple of dollars here plus minus wouldn’t make any difference to the Indian economy per se,” he explained, suggesting oil may not be a major trigger for markets immediately.

According to Basumallick, one of the biggest trends has been constant sector rotation. “Any sector which does well for a month or two sees profit booking, and money moves to another sector,” he said. This shows investors are focusing more on short-term gains rather than staying invested for longer periods.

Despite near-term frustration, Basumallick remains optimistic. He sees opportunities in defence, infrastructure, capital goods, chemicals, auto and cement. “Stocks have become reasonably cheaper… and aggregate growth has gone above around 12% after nearly five quarters,” he said.

He added that markets are likely to break out eventually, stressing, “In a growing economy, ultimately the breakout is going to happen upwards.”

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)