Markets to Shift from Geopolitical Noise to Earnings, Says Devina Mehra

While global attention remains fixed on potential geopolitical resolutions like the Iran-US deal, Indian equity markets are poised to find their momentum through fundamental drivers. Devina Mehra, Founder & CMD of First Global, suggests that while easing tensions may remove market overhangs, long-term growth will be dictated by earnings, liquidity, and improved market breadth.

Moving Beyond Geopolitical Volatility

A common pitfall for investors is attempting to time the market based on international conflicts. Mehra argues that historical data spanning 125 years—including two World Wars and the 9/11 attacks—shows that markets eventually shrug off geopolitical shocks. While crude oil fluctuations remain a critical factor for India due to their direct impact on corporate earnings, Mehra cautions against building investment strategies around uncertain geopolitical outcomes. Instead, the focus should remain on the underlying economic indicators and earnings trends.

Improving Market Breadth and Positive Indicators

One of the most significant shifts in the current market landscape is the improvement in market breadth. Mehra notes a stark contrast between the market dynamics of early 2025 and the present. In early 2025, despite rising indices, the median stock was actually down, with 40% of stocks declining by more than 10%.

Currently, the situation has "flipped" in a healthy direction; a majority of stocks are now outperforming the indices. This broadening participation suggests a more robust and sustainable market structure. Given that indicators are currently in the "positive" range, Mehra advises investors to remain invested within their designated equity allocations rather than trying to predict exact timing.

The Danger of Emotional Investing and Sentiment

Mehra warns that investor behavior is often driven by emotions that act as "contra indicators." Recent data shows a jittery sentiment among Indian investors, evidenced by negative SIP numbers and a decline in account openings. Historically, mutual fund inflows tend to peak at market highs and bottom out at market lows—the exact opposite of rational behavior.

"When you are panicking is when you need to remain in the market," Mehra emphasizes. She observes that the narrative has shifted from fund managers selling the "India growth story" eighteen months ago to a sudden, overwhelming focus on risks today. This extreme negativity often signals that future returns are likely to be above normal.

Rethinking Global Diversification

For those looking beyond India, Mehra stresses that true diversification goes far beyond simply buying US index funds or the "Magnificent Seven" tech stocks. She notes that the leadership in US markets has narrowed, and many of yesterday's winners are now underperforming.

Instead of chasing concentrated US themes, she advocates for a broader global approach. Her firm has moved from being underweight on the US to being overweight on Europe and China, while also adding exposure to markets like Malaysia and Mexico. She warns that global investing requires genuine expertise, cautioning against simplified schemes that fail to anticipate shifting market leadership.

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