Experts Say Buy Good Quality Stocks in Unsure Market

Experts are telling people to buy stocks that are doing well and have good earnings. The market is a bit unsure right now, so it's important to choose carefully. Some experts think smaller companies might do better soon.
By Newsroom | Finance, Markets |

Shifting Investor Attention in a Dynamic Market Landscape

The current market environment is characterized by a complex interplay of global economic factors and domestic corporate performance. Investors are navigating a period where discerning valuable investment opportunities requires careful consideration of earnings, valuation, and broader economic stability. There's a palpable shift in expert recommendations, moving away from speculative growth plays towards more grounded, earnings-backed investments. The ETMarkets Smart Talk series has featured several analysts offering their perspectives on how to best position portfolios for the coming months and years.

Recent market activity has been influenced by a range of news flows. Analysts are closely watching for signs of economic recovery and corporate earnings growth to validate current market valuations.

  • Earnings Season Focus: The performance of companies during the December quarter earnings season is under scrutiny, particularly for those with high price-to-earnings (P/E) ratios.

  • Global Economic Ties: Sustained foreign investment in domestic markets is seen as dependent on a stable US Federal Reserve policy outlook and concrete evidence of Indian corporate earnings growth.

  • Market Performance Indicators: Technical indicators, such as stocks crossing their 200-day moving averages, are being used to identify potential market movers.

Expert Views on Market Direction and Investment Strategy

Analysts participating in the ETMarkets Smart Talk series have offered varied, yet often overlapping, insights into market trends and preferred investment strategies.

Mid and Small-Cap Potential

Several experts believe that mid and small-cap stocks could offer better returns.

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  • Mohit Khanna suggests a preference for mid and small-caps as earnings are expected to improve in FY27–28, even as the broader market might trade within a range. This implies a selective approach within these market segments.

  • Siddhartha Khemka has indicated that selective mid and small-cap stocks are likely to outperform, emphasizing the importance of quality over momentum for 2026.

Valuation Concerns and Quality Focus

A common theme is the caution against investing in high P/E stocks without a strong earnings foundation.

  • Sandeep Nayak advises against companies trading at 40-50 times their earnings if there isn't a clear backing from actual earnings. He notes that capital allocated to companies based on long-term potential rather than immediate earnings is a cause for concern.

  • The emphasis is on identifying companies with robust fundamentals that can justify their valuations.

Fixed Income's Continued Relevance

While equities remain a focus, the role of fixed income is also being discussed.

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  • Joseph Thomas acknowledges that fixed income continues to be relevant, with a preference for corporate bonds. This suggests an assessment of risk-reward within the debt markets.

Domestic Sector Preferences

Some analysts are identifying specific domestic sectors as attractive investment destinations.

  • V. Srivatsa of UTI MF has indicated an increase in investments in domestic sectors such as autos, banks, and telecommunications. This points to a belief in the inherent strength and growth prospects of these core Indian industries.

Evidence and Data Points

  • Technical Indicators: On February 16, 2026, 12 stocks within the Nifty 500 pack reportedly crossed above their 200-day moving averages, as per stockedge.com.

  • Earnings Trajectory: Projections for improved earnings in FY27–28 are influencing the outlook for mid and small-cap segments.

  • Valuation Benchmarks: Concerns are raised for companies with P/E ratios of 40-50x without adequate earnings support.

Expert Commentary Synthesis

"Themes where capital has been allocated based on long-term potential rather than near-term earnings visibility are areas of concern." - Sandeep Nayak

"Selective small & midcaps to outperform; focus on quality over momentum in 2026." - Siddhartha Khemka

"Range-bound markets ahead; prefer mid & smallcaps as earnings pick up in FY27–28." - Mohit Khanna

"Fixed income remains relevant, but corporate bonds favoured." - Joseph Thomas

Conclusion and Implications

The consensus among several market experts points towards a cautious yet selective approach to investing. While the overall market may experience periods of range-bound trading, opportunities are seen in specific mid and small-cap stocks that demonstrate strong fundamentals and a clear path to earnings growth. The emphasis is decidedly on "quality over momentum," urging investors to avoid highly valued companies that lack substantial earnings backing. Furthermore, the continued relevance of fixed income, particularly corporate bonds, and the specific domestic sectors like autos, banks, and telecom, are highlighted as areas for strategic allocation. Investors are advised to conduct thorough due diligence, focusing on the underlying strength and valuation of companies rather than simply chasing short-term market trends.

Sources Used:

  • ETMarkets Smart Talk: Range-bound markets ahead; prefer mid & smallcaps as earnings pick up in FY27–28: Mohit Khanna

  • Link: https://economictimes.indiatimes.com/markets/expert-view/etmarkets-smart-talk-range-bound-markets-ahead-prefer-mid-smallcaps-as-earnings-pick-up-in-fy2728-mohit-khanna/articleshow/128237435.cms

  • Context: Article provides an expert's outlook on market direction and preferred investment segments.

  • ETMarkets Smart Talk| Avoid 40–50x P/E stories without earnings backing, says Sandeep Nayak - News Air Insight - NewsAirInsight

  • Link: https://newsairinsight.com/etmarkets-smart-talk-avoid-40-50x-p-e-stories-without-earnings-backing-says-sandeep-nayak-news-air-insight/

  • Context: Features an expert's warning against speculative investments and highlights the importance of earnings for valuation.

  • ETMarkets Smart Talk | Fixed income remains relevant, but corporate bonds favoured: Joseph Thomas - Great Investor

  • Link: https://great-investor.com/2025/07/17/etmarkets-smart-talk-fixed-income-remains-relevant-but-corporate-bonds-favoured-joseph-thomas/

  • Context: Presents an expert's view on the role of fixed income in investment portfolios.

  • ETMarkets Smart Talk – We’re adding to domestic plays like autos, banks & telecom: V. Srivatsa, UTI MF – Investment Solutions

  • Link: https://www.investment-solutions.co/2025/06/06/etmarkets-smart-talk-were-adding-to-domestic-plays-like-autos-banks-telecom-v-srivatsa-uti-mf/

  • Context: This article, marked as low priority due to summary quality, indicates specific sector preferences by a fund manager.

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Frequently Asked Questions

Q: What kind of stocks should I buy now?
Experts say to buy stocks that have good earnings and are good quality. Avoid stocks that are very expensive but don't make much money.
Q: Are small companies good to invest in?
Some experts think that smaller and medium-sized companies could do well in the future. They say to pick the good ones.
Q: What about other types of investments?
Some experts still think that bonds are a good idea. They like company bonds the best.