India's equity markets may continue to witness bouts of volatility as geopolitical tensions in West Asia keep investors on edge. However, the broader earnings outlook remains intact, and selective opportunities continue to emerge across sectors, according to Shibani Sircar Kurian, Senior Executive Vice President, Senior Fund Manager and Head of Equity Research at Kotak Mahindra Asset Management Company.

Speaking to ET Now, Kurian said the current market environment requires a bottom-up and stock-specific approach rather than broad market bets.

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Largecaps and midcaps remain preferred

While benchmark earnings growth has remained in the mid-single digits, Kurian pointed out that the broader market has delivered relatively stronger earnings performance.

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"As long as the Middle East conflict continues, markets are likely to remain volatile. Our portfolio construction remains focused on companies with strong growth visibility and structural domestic growth drivers," she said.

Kotak AMC continues to favour large-cap and mid-cap stocks. According to Kurian, large-cap valuations remain slightly below long-term averages, while select mid-cap companies continue to offer attractive opportunities despite elevated headline valuations.

FY27 earnings outlook still healthy

Kurian expects some pressure on earnings in the first quarter of FY27 because of higher commodity and input costs. However, consensus estimates still point to mid-teen earnings growth for the full fiscal year.

She cautioned that if geopolitical tensions persist for an extended period, earnings expectations may need to be reassessed.

Among sectors, she believes banking and financial services, healthcare, industrials and metals are likely to be key earnings drivers during FY27.

On the other hand, sectors directly exposed to rising crude oil prices, including automobile manufacturers and oil-linked businesses, could face near-term margin pressures.

Banking remains a top bet

Kurian remains constructive on large private sector banks despite their recent underperformance.

She noted that loan growth is becoming more broad-based, while large private banks have gained market share in deposits. Asset quality trends have also remained stable, easing concerns about a sharp rise in credit costs.

"Valuations are significantly below their long-term averages, while return on equity profiles are likely to improve. This is a segment where earnings and valuations are aligning favourably," she said.

Healthcare and industrials also attractive

Healthcare, particularly hospital operators, continues to feature prominently in Kotak AMC's portfolios due to strong earnings visibility.

The fund house is also positive on industrial companies benefiting from India's domestic investment cycle and healthy order books. However, Kurian stressed that stock selection remains critical because valuations vary widely across the sector.

Cautious view on IT sector

On information technology stocks, Kurian said Kotak AMC remains neutral to slightly underweight.

According to her, the sector continues to face two key challenges: uncertainty around discretionary technology spending and concerns about the impact of artificial intelligence on traditional IT services.

While she believes AI creates new growth opportunities rather than destroying the sector, increasing client demands for productivity gains are putting pressure on pricing and margins.

"Management commentary suggests demand conditions remain challenging, with no meaningful improvement visible yet," she said.

Defence offers long runway for growth

Kurian remains optimistic on India's defence sector, calling it one of the most compelling opportunities within the broader industrials space.

She highlighted two major growth drivers: increasing domestic defence spending and the government's push towards indigenisation. Export opportunities are also expanding, creating a significant long-term opportunity for both public and private sector defence companies.

"With stronger order inflows and expanding export potential, the runway for growth remains substantial," she said.

For investors navigating uncertain markets, Kurian's message is clear: focus on company fundamentals, stay selective, and look for sectors backed by long-term structural growth trends rather than short-term market noise.