As global economic clouds gather, investment strategists are turning towards a safety-first approach in the Indian markets. The recommendation is clear: focus on companies with strong domestic demand as tariffs and recession risks loom large internationally. Sectors like utilities, healthcare, telecom, financials, pharmaceuticals, consumer staples and quick commerce are being touted as relatively insulated from global economic shocks.

Domestic Demand is Key

Several Indian companies exemplify this domestic strength. Giants like NTPC and Power Grid Corp of India, primarily focused on the Indian market, are experiencing consistent growth driven by the nation’s ever-increasing electricity demand. Recent data from PharmaTrac indicates a healthy 7.5 percent sales growth in the Indian pharmaceutical market last month, showcasing the resilience of essential sectors. While an overall economic slowdown might moderate the pace of sales increase, fundamental needs such as healthcare, mobile services and insurance are unlikely to see drastic cuts in consumer spending. India Ratings and Research, for instance, projects a robust 13 percent growth in the general insurance market for FY26. Hospital revenues and telecom sector earnings, boosted by tariff revisions, are also projected to climb. As Nuvama Institutional Equities notes, sectors with stable demand, oligopolistic structures, favourable input costs, and reduced competitive pressure are the preferred picks.

Valuation Still a Concern

However, the optimism comes with a caveat. These defensive stocks are not bargain buys. Even after recent market corrections, many trade at valuations that are either premium to the broader market or on par with pre-COVID levels. The price-to-book value ratios of NTPC and Power Grid, for example, are considerably higher than in 2019. Healthcare leaders like Apollo Hospitals and Max Healthcare command forward price-to-earnings multiples of 50 and 60 times, respectively. This raises a crucial question: Are these stocks attractively priced for significant investment? The backdrop of softening corporate earnings and intensifying global and domestic economic headwinds suggests caution. Markets are bracing themselves for another quarter of lacklustre results.

FM Pushes India Growth Story

Interestingly, as markets navigate these uncertainties, Finance Minister Nirmala Sitharaman is actively promoting India’s growth narrative on the international stage. During her UK visit, she engaged with Prudential’s Chair, Shriti Vadera, highlighting the growth potential of India’s insurance sector, particularly in reinsurance and health insurance. She also showcased the opportunities within GIFT City, encouraging deeper engagement and investment. This proactive approach to attract foreign investment underscores India’s long-term growth ambitions, even as near-term global risks persist.

What should investors watch out for? If global trade tensions escalate and impact economic growth more severely than anticipated, FY26 earnings estimates may face downward revisions. This could trigger further stock price corrections and broader market valuation adjustments. Keeping a close eye on global economic signals and corporate earnings reports will be crucial in the coming months.

Image Courtesy: X (CNBC-TV18)