Bottom-up stock picking crucial as market risks rise: Rajiv Batra

In times of geopolitical tension and market volatility, investors are once again being reminded of the importance of discipline over aggression. With oil prices fluctuating, global cues turning uncertain, and even traditional safe havens losing shine, the current environment demands a shift in strategy. Rajiv Batra, from JPMorgan speaking to ET Now, described the phase as a throwback to an earlier era, noting, “It reminds us of the 90s… we are going back to square one,” while emphasizing that “risk management is ultra important… even more than before.”

He pointed out that the idea of safety in markets has become relative rather than absolute. “There are no hideouts… only relative returns,” he said, urging investors to “go lower on beta… focus on quality and protect capital.” The core message is clear—this is not the time to chase ambitious returns, but to preserve capital, because “capital saved now will help generate higher returns later.”

On sectoral positioning, Batra cautioned against blindly relying on defensives. While they may offer some cushion, they are not immune to rising input costs and macro pressures. “Defensives can help… but not fully safeguard returns,” he noted, adding that “second-order impact will also come into play.” In such an environment, he advised investors to “take a bottom-up approach rather than a sectoral call,” focusing on companies with strong fundamentals, pricing power, and consistent shareholder returns.

The outlook on earnings, he explained, depends largely on how long the current disruption lasts. “If it goes beyond four weeks, earnings will be impacted,” he said, highlighting that “normalisation can take three to six months” and that “longer disruption means higher impact on earnings.” This suggests that while short-term shocks may be absorbed, prolonged uncertainty could lead to meaningful downgrades in growth expectations.

Despite the volatility, Batra remains constructive on the banking space, particularly public sector banks. “We continue to prefer PSU banks… they are number one,” he said, pointing to improving macro conditions. According to him, “higher nominal growth will support credit growth,” and over time, “financials will again become the preferred sector.”

He also stressed that governance is becoming a key differentiator in emerging markets. “Everyone is working on guardrails… including corporates,” he observed, adding that “governance will be valued more by investors.” India, in his view, is well placed on this front, with a steady improvement in corporate practices over the years.

On the auto sector, Batra believes the impact of the current crisis may not be immediate. “Demand impact needs at least three months to show,” he explained, noting that “auto impact will come with a lag” and that the “shock has to sustain longer to hurt earnings.” This indicates that while near-term numbers may hold up, risks could emerge if the uncertainty extends.

Overall, the message for investors is one of balance and timing. As Batra summed it up, “It is a defence and offence strategy… like cricket.” In other words, protecting capital in the present is essential to being able to seize opportunities when clarity returns.