Stick to value, avoid risky bets: Gautam Shah’s playbook in a volatile market

Indian equity markets extended their decline on Friday, weighed down by a sharp sell-off in banking heavyweights, with HDFC Bank emerging as a key drag on sentiment. The fall pushed the Nifty below the crucial 23,000 mark, intensifying concerns that the correction may not be over yet. While global weakness has played its part, experts believe that underlying fragility in domestic markets had already been building for months.

Speaking to ET Now, Gautam Shah from Goldilocks Global Research said, “Today, we might be sinking with the rest of the world, but for the last 6 to 12 months the writing has been on the wall that our markets are inherently weak.” He added,

“We continue to follow lower tops and lower bottoms… I do believe that we will probably gradually get towards a level of 22,000. So, there is more room on the downside.”

The biggest concern now stems from the banking space, which until recently had been the backbone of the market. The sudden reversal in this sector has amplified the downside risk.

“Just a couple of weeks back we were close to 60,000 on the Bank Nifty… now with the last man standing sector coming off, the entire market is looking weak,” Shah said. He further warned, “Our working level on the Bank Nifty is about 52,000… one should not look at bottom fishing even now.” The shift in leadership from support to drag has left the broader market exposed, particularly given the heavy weight of banking stocks in the indices.

Even sectors that have already corrected sharply may not be out of danger. The IT pack, despite its steep fall, continues to face uncertainty. “The IT sector has already seen a large fall… but I still feel that the AI disruption trade is still at play,” Shah noted. He added, “My worst case for the IT index is about 26,000… I would still not touch IT even now.” This suggests that valuations alone may not be enough to attract buyers in a market where structural concerns remain unresolved.

Amid the broader sell-off, pockets of resilience are beginning to stand out. Shah pointed to non-banking PSU stocks and commodity-linked names as areas where smart money appears to be positioning itself. “The non-banking PSUs is where the real action is… the smart money seems to be hiding there,” he said, adding, “It is really all about value and not about growth.” This shift towards value-driven investing reflects a more defensive approach in uncertain times.

The energy space, in particular, is emerging as a strong structural theme, supported by global supply disruptions and rising crude prices. “Energy is the next mega trend… this entire basket has stood out beautifully,” Shah said. He further noted, “Oil is likely to go back to $120–125… some of these stocks in India are going to be big beneficiaries.” At the same time, rising oil prices are adding to macroeconomic stress, especially with the rupee under pressure. “With the Indian rupee at a lifetime low, we did not need more trouble with oil,” he remarked, adding, “Charts are suggesting that we are likely to go back to $120–125.”

Despite the near-term volatility, Shah continues to favour equities as an asset class, albeit with a clear tilt towards value. “It is equities even now… within the Indian markets, you have to look at value,” he said, highlighting that “stocks in the PE zone of 7 to 20… that is where the bigger opportunity is.” However, he remains cautious on segments that have seen strong rallies or where valuations appear stretched. “Defence is already in the price… these are not levels to make any commitment,” he said. On autos, his stance is more bearish: “I remain super bearish… maybe another 10-12-15% downside.” He also advised staying away from consumption for now, noting, “Let the dust settle and then we will go back to looking at consumption.”

With multiple headwinds—from banking stress and global uncertainty to rising oil prices—converging at once, the market outlook remains fragile. The message for investors is clear: avoid rushing into the market, stay selective, and focus on value pockets while waiting for clearer signs of a bottom.