Winners & Losers: Sectors to Watch in the Current Global Crisis

PMS Bazaar recently organized a webinar titled “Winners & Losers: Sectors to Watch in the Current Global Crisis,” which featured Mr. Arpit Shah, Co-Founder and Director, Care Portfolio Managers. This blog covers the important points shared in this insightful webinar.

The webinar blog covers insights from Mr. Arpit, which includes his market outlook, focusing on geopolitical tensions, especially the Iran–Israel conflict, and their impact on markets. He emphasized staying invested during volatility, India’s energy import risks, and inflation pressures. It highlighted sectoral impacts and opportunities, with strong conviction in fertilizers as a defensive-growth sector driven by food security, policy support, and import substitution potential.

Key aspects covered in this webinar blog include:

Embracing market fear as an opportunity and staying invested during volatility
India’s vulnerability due to heavy energy import dependence through the Hormuz Strait
Impact of rising crude oil prices on inflation, fiscal deficit, and interest rates
Sectoral winners and losers amid geopolitical and energy shocks
Growth potential in renewables, defense, data centers, import substitution, FMCG, and tourism
India’s resilient growth story despite global rating agency concerns
Strategic shift toward fertilizers as a safe, growth-oriented investment theme
Structural transformation in India’s fertilizer industry from urea to NPK fertilizers
Government policy support ensuring fertilizer sector stability during crises
Case studies of key fertilizer companies and their growth strategies
Investment strategy focusing on small caps, backward integration, and thematic investing in 2026

Summary: Arpit Shah addresses framed geopolitical turmoil, especially the Iran–Israel conflict, as a source of volatility rather than fear. He argued investors should stay invested, as wealth is created through participation during market cycles. Highlighting India’s energy import vulnerability via the Hormuz Strait, he explained inflation and fiscal pressures from rising crude. He identified sectoral impacts, with airlines and ceramics hit hardest, while renewables, defense, data centers, import substitution, FMCG, and tourism offer opportunities. Shah strongly endorsed fertilizers as a defensive-growth theme driven by food security, policy support, and import substitution, calling it a key re-rating opportunity in 2026.

Mr. Arpit Shah shared his expert perspective, addressing the palpable anxiety among investors following the escalation of the Iran-Israel conflict. His address serves as both a sobering analysis of current vulnerabilities and a strategic roadmap for wealth creation during periods of heightened volatility.

Embracing Market Fear as an Opportunity

Mr. Arpit began his session by referencing Warren Buffett’s timeless wisdom regarding market sentiment. He noted that while the "fever" of the Iran-Israel war has sparked a new wave of fear—manifesting in sharp sell-offs, currency volatility, and rising crude prices—investors must resist the urge to retreat. He argued that while macro factors undoubtedly impact the Indian economy and force a rethink of government policy, wealth is created through participation, not avoidance.

His central thesis is that the market always finds a trigger for correction when valuations are at their peak. He pointed out that in 2024, few could have visualized the specific geopolitical conflicts of 2026, yet the high valuations of that time made a correction inevitable. By contrast, when good valuations are available, the market eventually finds a trigger to move upward. He urged investors to ignore the "noise" of geopolitical tweets and headlines, focusing instead on the fundamental intersection of value and market cycles.

The Reality of India’s Energy Vulnerability

A significant portion of Mr. Arpit analysis centered on India’s dependency on energy imports. He highlighted that the Hormuz Strait remains a critical chokepoint, accounting for roughly 60% of India’s LPG, 47% of its crude oil, and 40% of its LNG imports. With domestic production lagging—meeting only 15% of crude and 50% of LNG needs—any disruption in West Asia translates into an immediate fiscal shock.

He detailed how every $1 rise in the price of a barrel of crude results in a 10,000 crore impact on India’s fiscal position. This pressure contributes to inflation risks, explaining why the RBI has recently maintained interest rates despite widespread expectations for a cut. Furthermore, he noted that while India is a developing nation often short on resources, the current crisis exposes a historic under-allocation to energy storage, with only a 40-day reserve for crude and a 15-to-20-day reserve for LPG.

Sectoral Winners and Losers in a Disrupted Economy

Mr. Arpit provided a granular breakdown of how energy costs are reshaping specific industries. He identified the airline industry as the most severely impacted, with Aviation Turbine Fuel (ATF) costs representing nearly 40% of operational expenses.

He noted that a 10% rise in ATF prices can lead to a 15% hit to EBITDA. Similarly, the tiles and ceramics sector, which relies on gas for 30% of manufacturing costs, faces revenue hits as the government prioritizes gas allocation for essential sectors like fertilizers.

However, the narrative is not entirely bleak. Mr. Arpit emphasized a "bottom-up" approach to identify companies positioned for growth. He highlighted several sectors poised for positive triggers:

Renewables & Defense: Shifted from "choices" to strategic necessities. In defense, he noted a transition from traditional heavy machinery to drone-centric warfare, following observations from the Russia-Ukraine and West Asian conflicts.
Data Centers: With geopolitical risks threatening data hubs in Saudi Arabia and the UAE, India’s tax holidays for data centers make it an attractive alternative.
Import Substitution: Companies in the chemical, fertilizer, and pharmaceutical sectors that focus on local APIs and backward integration are likely to eat up the market share of players dependent on fragile global supply chains.
Tourism & FMCG: High airfares and rupee depreciation may boost domestic hospitality, while strong FMCG brands will successfully pass increased production costs to consumers.

The India Growth Story: Intact and Neutral

Despite the downgrades from global rating agencies—which Mr. Arpit personally views with skepticism—he maintains that the India growth story remains robust. He lauded India’s "neutral" diplomatic stance, noting the government's ability to engage with Israel while maintaining diplomatic protocols with Iran. This balancing act, combined with diversified energy sourcing from Russia, Canada, and the US, has shielded local consumers from dramatic price hikes at the petrol pump, even as industrial energy costs rise.

A Strategic Shift to Fertilizers

During an interactive poll, 41% of the audience prioritized "safety and stability" over pure growth. In response, Mr. Arpit revealed that Care PMS has shifted its focus, taking a 15% exposure in the fertilizer sector. He described this as a "triple-threat" investment: offering safety, growth, and attractive valuation.

He argued that food security is the primary concern of any political administration. When the conflict intensified in February, the Indian government immediately moved to ensure that fertilizer plants received 70% to 95% of gas allocations to protect the Kharif sowing season. He noted that demand for fertilizers is inelastic; it is a "roti, kapda, makaan" (food, clothing, shelter) essential where "roti" always comes first.

Growth Triggers and Re-rating Potential

Closing his presentation, Mr. Arpit identified a significant shift within the fertilizer industry. India is moving away from a heavy reliance on imported urea toward non-urea alternatives and backward-integrated manufacturing. He believes that many companies in this space are currently underpriced and ripe for a "re-rating." By combining the government’s push for import substitution with the inherent safety of the sector, he suggests that fertilizers represent a unique opportunity to create wealth while the rest of the market remains fixated on geopolitical volatility.

The Great Fertilizer Pivot: A Strategic Deep Dive

Continuing his address Mr. Arpit transitioned from a broad macroeconomic outlook to a granular defense of the fertilizer sector. He highlighted how the Indian government’s 2015 Urea Policy successfully shifted the needle from import reliance to self-sufficiency. Over the last decade, while urea demand grew by 20%, local manufacturing expanded to replace nearly all imports.

However, Mr. Arpit observed an even more compelling trend: a structural shift from urea to NPK (Nitrogen, Phosphorus, and Potassium) fertilizers. While urea remains heavily subsidized, increasing soil health awareness has seen NPK demand skyrocket by 80%. Currently, imports meet 20% of this demand, creating a massive opening for "import substitution" similar to the urea success story.

He reinforced the sector’s "safety" by noting the government's decisive action during the 2022 Russia-Ukraine crisis, where subsidies were doubled from 30,000 to 60,000 crores to absorb price shocks. Mr. Shah asserted that the government will continue to prioritize food security over fiscal deficit targets, ensuring that the fertilizer industry remains insulated from global volatility.

High-Conviction Case Studies

Mr. Arpit detailed a 15% portfolio exposure at Care PMS across three specific players:

Coromandel International: Part of the Murugappa Group, this company is diversifying away from government subsidies. By investing in drones, crop protection, and "nano" organic fertilizers, they have expanded EBITDA margins to 12%.
Paradip Phosphates: Currently the largest phosphatic player in India, they are pursuing a 5x capacity expansion. Mr. Shah praised their strategic tie-up with Morocco’s OCP Group, which secures their raw material supply (rock phosphate), effectively de-risking their input costs.
Chambal Fertilisers: As a dominant private urea player with a 10% market share, Chambal is improving capital efficiency. Mr. Shah noted their working capital cycle plummeted from 250 days to just 60 days, reflecting superior management of cash flows.

The Investor’s Playbook for 2026

In the concluding Q&A, Mr. Arpit, a self-described "hardcore investor" who never sits on cash, addressed the psychology of market exits. He advised investors to emotionally disconnect from losses, suggesting they exit "inferior" companies to rotate into stronger themes like metals and pharma.

While acknowledging that the "buy and forget" era is over, he remains bullish on small caps as the primary engine for growth. He concluded by stating that while sectors like IT and Banking dominate the Sensex, the real wealth in the current cycle lies in niche, backward-integrated manufacturing stories where valuations remain attractive despite global storms.

Mr. Arpit covered all the topics mentioned above in-depth and answered questions from the audience toward the end of the session. For more such insights on this webinar, watch the recording of this insightful session through the appended link below.