I've turned bullish on the markets after a long time: Andrew Holland

Andrew Holland, head - new asset class, Nippon India Asset Management in a Q&Q with Puneet Wadhwa says that the markets are assuming that the West Asia conflict won't be prolonged.

As markets swing between hope and uncertainty regarding a resolution to the ongoing West Asia conflict, Andrew Holland, head – new asset class, Nippon India Asset Management, tells Puneet Wadhwa, in an interview in Mumbai, that the markets will give in if the conflict drags on for six more months. For now, he believes the markets are assuming it won’t be prolonged. Edited excerpts:

 

Have the markets come to terms with the uncertainty surrounding West Asia?

 

I think volatility will remain quite high. There are two possible paths. If there’s a ceasefire, that’s clearly positive — oil prices will come down and markets will return to what we consider “normal.” We can debate what that normal is, but broadly things stabilise.

 

 

If the situation is prolonged, especially with disruptions in the Strait of Hormuz, it will have a significant impact — not just on India and Asia, but also Europe.

 

Right now, markets seem to be looking through this risk and assuming there will be a settlement. Bond yields and risk-on trades — crypto, gold, silver — are all moving up, along with US markets hitting new highs. The market is effectively saying there will be some resolution to the West Asia conflict.

 

While markets seem hopeful, what if things go the other way over the next few months?

 

There are two scenarios. One is a delay — talks continue but things don’t escalate further. The other is escalation, which the market is not currently pricing in. If escalation happens, oil prices will rise again, impacting global earnings, inflation, and potentially leading to stagflation. That’s when everything becomes more complicated.

 

When do you think the markets might lose hope of a resolution in West Asia?

 

If the conflict drags on for six months, that’s when sentiment could shift and markets will lose hope of a settlement, similar to Ukraine/Russia conflict. For now, markets are assuming it won’t be prolonged.

 

Will oil above $90 a barrel be the new normal? Are financial markets ready for this?

 

Higher oil prices are likely to lead to higher inflation, which, in turn, will make it harder for central banks to cut interest rates.

 

At the same time, growth could slow because consumers feel the pressure of higher prices.

 

That’s where stagflation risks come in — slower growth with rising inflation. If there’s a settlement, US interest rates are likely to come down which would weaken the dollar and support emerging markets, with capital flowing back into them.

 

Does this environment weaken the case for equities as an asset class?

 

Not really. Valuations have come down over the last two years, making them more attractive. If earnings revert to 10–12 per cent growth, markets should move in line with that. If growth accelerates into FY26–27, markets could do even better.

 

Also, when foreign investors return, they typically prefer largecaps. Recently, markets rebounded about 10 per cent from lows, while smallcaps are up 15–16 per cent, indicating broader participation. I’ve turned bullish on the markets after a long time.

 

How should one allocate funds now?

 

I would lean towards 60–70 per cent in largecaps, with the rest split between mid and smallcaps, as valuations are becoming more attractive across segments. The defence sector remains strong due to sustained government spending. Hospitality is interesting but may take time to fully recover, especially inbound travel. Beverages should continue to perform well as premiumisation continues.

 

What about foreign institutional investors (FIIs)? Why would they return to India?

 

Two years ago, it was all about India. Then flows shifted to China, South Korea, and Taiwan, especially driven by artificial intelligence (AI). If the AI narrative weakens — say spending slows — money could rotate back to India, which offers more diversified growth rather than being a pure AI play. A stable rupee would also boost confidence among foreign investors.

 

Apt time for the government to relook at tax rates for foreign investors?

 

While that’s always attractive in theory, investors don’t come in just for tax savings. They come for returns. Even if taxes are reduced slightly, it won’t be the primary driver. Returns and growth prospects matter far more.