Markets to Shift Focus from Geopolitics to Earnings, Says Devina Mehra

As global tensions fluctuate, investors are questioning whether geopolitical resolutions will spark a new bull run. According to Devina Mehra, Founder & CMD of First Global, while major deals like a potential Iran–US pact may ease market overhangs, they will not be the primary engine for Indian equity growth.

Earnings and Liquidity Over Geopolitical Headlines

Devina Mehra suggests that market direction will increasingly be dictated by corporate earnings trends, liquidity cycles, and investor positioning rather than headlines. While she acknowledges that a resolution in the Middle East could remove a significant "overhang" from global markets, she cautions against basing investment strategies on such uncertain outcomes.

For the Indian context, Mehra notes that while crude oil movements are a critical factor due to their direct impact on domestic earnings, the broader market movement is becoming more fundamental-driven. She emphasizes that indicators currently look positive, signaling that the market is moving into a new phase of maturity compared to the volatility seen in early 2025.

Improving Market Breadth and the Sentiment Trap

One of the most significant shifts in the Indian market is the improvement in market breadth. Mehra highlights a stark contrast between the current landscape and the previous year. In 2025, despite indices being up, the median stock was down, and 40% of stocks had fallen by more than 10%. Today, the situation has flipped: a majority of stocks are outperforming the indices, a sign of a healthier, more distributed rally.

However, Mehra warns against "emotional behavior," noting that recent data shows SIP (Systematic Investment Plan) numbers and new account openings have turned negative. She points out a historical paradox: mutual fund inflows often peak at market highs and bottom out during market lows. "When you are panicking is when you need to remain in the market," she advises, noting that extremely negative sentiment often acts as a contra-indicator for superior future returns.

Rethinking Global Diversification

A key takeaway for sophisticated investors is the need to look beyond the US markets. Mehra argues that "the US is not the globe" and warns that many investors are over-concentrated in a few high-performing US stocks. She observes that the dominance of the "Magnificent Seven" has waned in 2025, with leadership in the global market shifting.

To achieve true diversification, Mehra recommends looking toward regions that are often below the radar. Her firm has recently moved toward being overweight in Europe and China, while adding exposure to emerging markets like Malaysia and Mexico. She cautions that global investing requires deep expertise, as many simplified schemes fail by chasing yesterday's winners rather than anticipating the next cycle of leadership.

Key Takeaways