Rising bond yields, oil prices keeping markets on edge; selective bets still emerging: Pankaj Pandey

Global equity markets are facing renewed pressure as rising bond yields in both the US and Japan trigger concerns over tighter financial conditions and elevated uncertainty. While benchmark indices had been hovering near record highs until recently, the spike in yields, coupled with geopolitical tensions and higher crude oil prices, has started weighing on investor sentiment.

Speaking to ET Now, Pankaj Pandey, Head Research, ICICIdirect.com said the current earnings season has largely remained stable despite volatility in global markets. According to him, largecap earnings growth has been around 9%, while broader markets have shown even stronger momentum.

“See, overall, our sense is that when we look at the earnings for the quarter which is sort of ongoing, earnings have been absolutely fine with largecaps growing at about 9 odd percent whereas the broader markets earning growth has been even pretty more robust,” Pandey said.

However, he cautioned that the biggest challenge for markets currently is the rise in crude oil prices linked to geopolitical uncertainty.

“The only thing which is holding the market is the higher crude oil prices which again is related to the geopolitical tensions which are sort of continuing,” he said.

Pandey added that if elevated oil prices persist for a longer period, several sectors could begin witnessing pressure on margins, which may eventually impact market sentiment more broadly.

Oil Prices Hold the Key
According to Pandey, a sustained rally in equities may remain difficult unless there is clarity on geopolitical tensions and some cooling in crude prices.

“Overall, sense is that the upside in the market will only come when this sort of gets resolved,” he said, adding that markets may continue to face pressure across segments until the conflict eases.

The sharp rise in global bond yields has also led investors to reassess sectoral positioning. Defensive pockets such as pharma, power and select domestic themes are increasingly attracting attention as investors turn cautious on export-heavy sectors.

IT Sector Finds Value Buyers, But Growth Concerns Persist
Pandey noted that rising bond yields and a weaker rupee could offer some support to Indian IT companies, particularly because valuations in the sector have become attractive after prolonged underperformance.

“So, overall, with the global bond yields expected to inch up higher given the fact that crude is still at elevated levels, it might have a slightly positive rub off on Indian IT which is now considered to be a value pick,” he said.

Still, he does not expect any major improvement in earnings growth over the next two financial years.

“But our sense is that we do not see meaningful improvement in the earnings compared to FY26. So, FY26 and FY27 earnings are largely going to be on similar lines,” Pandey added.

He said investors are currently rewarding companies where earnings visibility remains strong, particularly in mid-tier IT.

Among IT stocks, he highlighted Persistent Systems, Coforge and Firstsource Solutions as companies where growth expectations remain relatively stronger.

“So, Persistent and Coforge are the only two stocks and if I have to add one, probably Firstsource is another stock which is guiding for a double-digit kind of a growth rate,” he said.

At the same time, he acknowledged that tier-I IT firms continue to struggle with muted growth despite reasonable valuations.

“Valuations are definitely attractive, but growth is something which is still sort of missing,” Pandey said.

Pharma and Hospitals Continue to Attract Interest
Within pharma, Pandey said he prefers companies with stronger domestic positioning and better earnings visibility.

He said Dr. Reddy's Laboratories and Cipla remain preferred picks, while cautioning that valuations in some CDMO names have become expensive after the recent rally.

Referring to Laurus Labs, he said the stock is trading at rich valuations despite strong capex plans.

Within healthcare, he believes hospitals offer a more stable domestic growth opportunity.

“So, Apollo Hospitals and Artemis is something what we are liking there,” he said, referring to Apollo Hospitals Enterprise and Artemis Hospitals.

On Zydus Lifesciences, Pandey remained constructive, citing strong guidance and improving margins.

“Given the fact that this company has been focusing on new launches and niche products, so our sense is that this stock looks very attractive to us,” he said.

AMCs Seen as a Cleaner Play on Market Recovery
Despite the ongoing uncertainty, domestic inflows into equity markets have remained resilient, according to Pandey. He believes asset management companies could emerge as one of the cleaner ways to participate in a market recovery whenever macro pressures ease.

“Our sense is that AMC or asset management companies are one of the best ways to play the stock, play this entire theme,” he said.

He specifically mentioned HDFC Asset Management Company as an attractive opportunity, while also acknowledging the strong performance already seen in Nippon Life India Asset Management.

According to Pandey, AMCs offer exposure to continued investor participation in equities without balance sheet risks associated with several other financial plays.

For now, though, he believes markets will continue to track crude oil prices and geopolitical developments closely, with investor sentiment likely to remain selective rather than broad-based.