As Indian equity benchmarks hover near all-time highs with limited directional cues, market expert Deven Choksey has advised investors to recalibrate expectations and adopt a more selective approach. Speaking to CNBC TV18, Choksey outlined a clear preference for financials and metals, while flagging valuation risks in defence and electronic manufacturing services (EMS) stocks.

At the previous close, the Sensex slipped marginally by 20 points to 84,675, while the Nifty edged lower by three points to 25,938 - a reminder that markets are no longer in a one-way rally. With headline indices consolidating after a strong run, stock selection rather than broad-based buying is increasingly becoming the dominant theme.

Choksey’s commentary fits into this backdrop. While acknowledging strong long-term structural stories across sectors, he cautioned that not all growth narratives justify current market prices.

Choksey remains constructive on the non-banking financial company (NBFC) space, highlighting Shriram Finance and Bajaj Finance as beneficiaries of balance sheet strength and favourable funding conditions. He pointed to Shriram Finance’s stated guidance of doubling its balance sheet every four years, calling it a powerful long-term compounding formula.

According to him, the combination of capital adequacy, improving cost of funds, and execution consistency leaves “enough fuel left in the tank” for these lenders. Importantly, he suggested that any near-term correction in these stocks should be viewed as an opportunity rather than a threat, provided investors have a three-to-four-year horizon.

In metals, Choksey’s optimism is linked to structural demand rather than cyclical momentum. He cited the rapid expansion of data centres as a key driver of long-term metal consumption, particularly for base and non-ferrous metals. On this theme, he expressed preference for Vedanta and Hindustan Zinc, companies that offer exposure to global metal demand trends while benefiting from operating leverage.

The significance of Choksey’s view lies in its emphasis on valuation discipline at a time when several thematic sectors have seen sharp re-ratings. His bullish stance on financials suggests confidence in India’s domestic growth engine, where credit demand, asset quality stability, and pricing power continue to support earnings visibility.

Meanwhile, his metals thesis underscores how global technology infrastructure - especially data centres - is quietly reshaping demand patterns. This shifts the metals story away from pure China-driven cycles toward more diversified and secular consumption drivers.

While Choksey did not cite specific policy triggers, his caution on defence stocks indirectly reflects how government-led order visibility is already well recognised by the market. Defence remains a strategic priority for India, with a clear indigenisation roadmap and steady order inflows. However, policy clarity alone may no longer be sufficient to drive stock prices higher from current levels.

Choksey was particularly candid about defence stocks, warning that markets appear to be pricing in growth two to three years in advance. With several defence names trading at 65–70 times earnings, he expects limited upside in the near term despite robust long-term prospects. His assessment suggests that investors may have to endure prolonged sideways movement even as business fundamentals remain intact.

A similar argument was made for EMS stocks. While acknowledging the “phenomenal opportunity” in electronics manufacturing, Choksey argued that valuations still leave little margin for error. In his view, when prices already discount three to four years of strong growth, even minor negative surprises can trigger sharp corrections. For these stocks to become attractive again, further valuation compression may be necessary.

For Indian markets, this perspective reinforces a rotation from narrative-driven buying to earnings-backed investing. Financials could continue to attract incremental capital as investors seek predictability and compounding, while metals may benefit from global capex cycles tied to digital infrastructure.

On the flip side, defence and EMS stocks may see muted returns in the near term unless earnings growth meaningfully outpaces expectations. This could lead to capital shifting away from crowded themes toward relatively under-owned sectors.

For broader market context and expert commentary, this interaction was reported by CNBC TV18.

The bullish case lies in financials sustaining credit growth with stable margins and metals benefiting from global structural demand. In this scenario, selective stocks could outperform even if indices remain range-bound.

The bearish case emerges if valuations across sectors continue to expand without commensurate earnings delivery. Defence and EMS stocks, in particular, could underperform if growth timelines slip or if market sentiment turns risk-averse.

Key risks include an unexpected slowdown in credit growth, global commodity price volatility affecting metals, and policy or execution delays in capital-intensive sectors. For high-valuation stocks, the biggest risk remains asymmetric - limited upside but meaningful downside if expectations are not met.