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Stocks Not Immune to Contagion: Why Emkay Advises Investors to Stay Defensive

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  //stocks-investing.news-articles.net/content/202 .. y-emkay-advises-investors-to-stay-defensive.html
  Published in Stocks and Investing on Thursday, December 11th 2025 at 6:36 GMT by Business Today

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Stocks Not Immune to Contagion: Why Emkay Advises Investors to Stay Defensive
— A comprehensive summary of the BusinessToday article dated 11 December 2025

1. The Global “Contagion” Narrative

The headline premise of the BusinessToday piece is that equity markets, whether in India or abroad, are increasingly vulnerable to what investors term contagion—the rapid transmission of shocks from one market or economy to another. While the phrase is often used in the context of financial crises, the article argues that even in today’s seemingly stable environment, a sudden spike in inflation, a geopolitical flash‑point, or a central‑bank decision can ripple through markets, leaving investors who were once comfortable with higher risk exposed.

Emkay, a prominent brokerage and wealth‑management firm, anchors its discussion in the idea that past episodes—such as the 2015–2016 Asian currency crisis or the 2020‑2021 COVID‑related sell‑off—demonstrate how interconnected global financial markets have become. Even a relatively modest shock in the United States or Europe can push domestic indices like the Nifty 50 or Sensex into turbulence, especially when domestic fundamentals are fragile.

2. Recent Market Moves and Their Triggers

The article chronicles the recent volatility that has been observed in the Indian markets during 2025:

• Nifty 50 and Sensex Movements – The index has seen a swing of roughly 3 % in a single week after a combination of global rate‑hike expectations and a dip in US tech stocks.
• Sector‑Specific Reactions – The IT and pharma sectors, typically considered defensive, pulled back after concerns over corporate earnings. Meanwhile, the FMCG segment remained relatively resilient, driven by steady consumption patterns.
• Credit Market Dynamics – RBI’s decision to maintain a 3.9 % policy repo rate, while stabilizing inflation at 6.4 %, has left many corporate bonds hovering in a “neutral” risk zone.

These micro‑events are framed as the tip of an iceberg, suggesting that a deeper contagion wave could be on the horizon if global macro‑economic conditions deteriorate further.

3. Why “Defensive” is the Right Stance

The bulk of the article quotes Emkay’s head of research, Rohit Sharma, who stresses that investors should not view defensive strategies as a sign of capitulation but rather as a prudent risk‑management approach. According to Sharma:

“In an era where volatility can be triggered by a single tweet from a central‑bank governor or a sudden policy shift in a major economy, the safest bet is to stay liquid and reduce exposure to highly leveraged positions.”

Key points of his argument include:

1. Liquidity as a Hedge – Holding a larger proportion of cash or liquid assets can enable investors to seize buying opportunities when prices dip.
2. Diversification Across Asset Classes – By allocating across equities, fixed income, and alternative investments (such as gold or real‑estate), investors can reduce the concentration risk associated with any one market.
3. Focus on Fundamentals – Even in defensive mode, the article suggests keeping a core portfolio of high‑quality, dividend‑yielding blue‑chip stocks with strong balance sheets.
4. Geographical Spread – Investing beyond domestic markets can spread risk; however, the article cautions against over‑exposure to emerging markets that may face sharper contagion.

4. Additional Context from Follow‑On Links

The article’s linked resources provide deeper context:

• Link to RBI Policy Commentary – A BusinessToday write‑up on RBI’s 2025 monetary policy meeting reveals that the Reserve Bank is prioritising price stability while keeping an eye on global growth. The commentary underscores that the decision to hold rates steady, while reassuring in the short term, may still leave corporate borrowing costs high.

• Link to Global Market Analysis – Another BusinessToday piece examines the European debt‑market developments, noting that high sovereign yields have pushed investors to seek safety in U.S. Treasuries. The spill‑over effect on the Indian market is described as a “risk‑off” sentiment that can depress equity valuations.

• Link to Emkay’s Market Outlook – Emkay’s own 2025 outlook article discusses a 4‑quarter revenue outlook for the firm, citing an expected rise in advisory fees as investors adopt a more cautious stance. It also provides a “defensive playbook” that includes specific ETF recommendations and sector‑tilt strategies.

5. Practical Recommendations for Individual Investors

Drawing from the article’s synthesis, Emkay outlines several actionable steps:

The article emphasizes that “defensive” does not equate to passive. Rather, it involves active monitoring, timely re‑balancing, and a willingness to take calculated risks when the market environment permits.

6. Bottom Line

In the BusinessToday article “Stocks not immune to contagion: Why Emkay wants investors to stay defensive,” the key takeaway is that the Indian equity market remains susceptible to global shocks. By adopting a defensive stance—emphasising liquidity, diversification, and a focus on fundamentals—investors can protect themselves from sudden downturns while positioning for eventual market recoveries. The article encourages a proactive mindset, backed by ongoing research and a clear understanding of how contagion can manifest across borders and asset classes.