Market may not recover until oil prices ease, West Asia tensions subside: Nepean’s Gautam Trivedi

Indian equities are unlikely to stage a sustained recovery until crude oil prices ease and geopolitical tensions subside, according to Gautam Trivedi, Co-Founder of Nepean Capital. While foreign investors have continued to sell Indian equities, Trivedi believes lower oil prices and greater clarity on the West Asia conflict will be key triggers for overseas capital to return.

Despite the near-term uncertainty, Trivedi remains constructive on India's long-term investment story. He expects capital expenditure across power infrastructure, data centers and manufacturing to continue over the coming years and believes select smallcap companies are well positioned to benefit from these structural trends. He also sees value emerging in parts of the IT sector after a prolonged correction.

Trivedi said domestic institutional investors have absorbed large foreign outflows, but other investor segments have remained under pressure.

According to Trivedi, the biggest catalyst for market recovery will be a decline in crude oil prices.

He added that the impact extends beyond crude prices alone, with shipping costs also rising sharply.

"It's not just the spot price. The average global freight rate for oil has gone up to $20 a barrel from $3 a year ago," he said.

Despite the market correction, Trivedi said Nepean Capital remains overweight on smallcap companies, particularly businesses led by first-generation entrepreneurs that are expanding capacity.

"We are going and finding companies in small-town India... they have a vision of where they want to be five to ten years from now," he said. He added that many of these companies are doubling to tripling their capacities, supported by long-term manufacturing and infrastructure trends.

Among existing holdings, he named ASM Technologies, Aeroflex and TD Power as examples of companies linked to these themes.

Trivedi also dismissed the sharp correction in certain power equipment stocks as an overreaction to the global AI sell-off.

"When you look at names like Hitachi Power... falling because of the AI unwind trade, that's silly because they are power companies," he said, noting that India's planned expansion in electricity generation and transmission will continue regardless of AI-related market sentiment.

Trivedi said Nepean Capital recently bought TCS, citing attractive valuations and improving AI-related revenue.

"The stock had corrected... and it's now trading at 13 times FY28 price-to-earnings," he said. He added that TCS' AI revenue contribution has increased while its investments in data centre infrastructure strengthen its long-term outlook.

Trivedi also supported removing capital gains tax on foreign portfolio investments, saying it would improve India's appeal to overseas investors, although broader global factors would still determine the pace of inflows.

For the full interview, watch the accompanying video

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