India’s stock market correction is creating an accumulation opportunity in quality companies, but investors should retain 10–15% cash as elevated crude oil, a weaker rupee and poor market breadth keep near-term risks high, according to Sonam Srivastava, founder and CEO of Wright Research. She recommends favouring largecaps and staggering purchases over the next three to four months.Edited excerpts from a chat on market outlook, sectoral opportunities and how to invest in this market:What is your current market outlook, and where are your models identifying the best risk-reward opportunities? Are they favouring any particular market-cap segment, sector or investment factor?Honestly, the near-term setup is looking a bit tricky. The Nifty slipping below 24,000 to close at 23,870 is not a great sign, and the market breadth is quite weak—just 109 stocks up against 390 down in the BSE500. Brent crude rates and the pressure on rupee is really squeezing the risk appetite that powered the first-half rally. So, our models have naturally shifted towards quality and low-volatility names, which is the usual move when things get uncertain. If I had to pick segments for fresh money, I’d stick with largecaps for now.Banking is still the best risk-reward pocket in my view—valuations are attractive, credit growth is strong, and NPAs are very low. There’s also some value in healthcare and a few capital goods names where order books are robust, and earnings don’t depend on crude. This correction feels like a genuine accumulation opportunity for quality, and I’m quite optimistic that patience will pay off in the second half of FY27, once the oil situation settles down.The sheer outperformance of small and midcaps have left many surprised even as everyone seems to believe that there’s value in largecaps. How would you explain the run-up in share prices in the broader market?If you’re wondering why the broader market has run up so much, it actually makes sense when you look at where things started. The Nifty SmallCap index had already fallen 7 per cent in CY25—its worst year since 2022—and the average smallcap was down about 33 per cent from its peak. That kind of reset always throws up real value in certain pockets.So, in the first half of this year, we saw the Nifty Smallcap 100 jump 6.08 per cent and the Midcap 100 up 2.17 per cent, even as the Sensex and Nifty dropped as much as 10 per cent.There are three big reasons for this. One, foreign selling has hammered largecaps, with FII holdings at multi-year lows after $17 billion in outflows, while domestic SIPs just keep buying the broader market. Two, mid and small companies have actually delivered better earnings—early Q1 FY27 numbers show profit growth beating revenue growth, which is always a good sign. Three, the recovery was very sharp—the Nifty Smallcap index shot up 18.4 per cent in April alone. So yes, largecaps look cheap on valuations, but the real action in flows and earnings has been elsewhere.If an investor had fresh money to deploy today, how would you divide it among large-, mid- and small-caps? Which three sectors would you overweight, which would you avoid, how much cash would you retain, and would you invest immediately or stagger purchases over the next few months?If I had fresh money to deploy today, I’d go 55 per cent largecaps, 30 per cent midcaps, and 15 per cent smallcaps. The tilt towards largecaps is really about comfort—valuations look better after the recent fall, and you want liquidity when the macro is this volatile.My top three sectors right now: banking and financials (credit growth is strong, balance sheets are clean), healthcare and pharma (earnings are resilient and they’re a natural hedge if the rupee keeps sliding), and domestic capital goods and infra (government capex is still coming through).I’d stay away from crude-sensitive names like OMCs, aviation, paints, and tyres until oil drops well below $85. I’d also keep 10 to 15 per cent in cash. For timing, I’d stagger the buying over the next three to four months—weekly or fortnightly tranches work well—and I’d get more aggressive if the Nifty heads towards 23,000. With the market now pricing in a 78 per cent chance of a Fed hike in September and West Asia still tense, averaging in is much safer than going all-in at once.The June-quarter earnings season is now underway. Which sectors can deliver meaningful earnings upgrades in FY27, and where do current market valuations still assume growth that companies may struggle to deliver?Earnings season has actually started on a pretty constructive note. HCL Tech, for example, posted a 20.3 per cent jump in net profit to Rs 4,624 crore on revenue of Rs 34,579 crore, and this early trend of margin-led profit growth is quite encouraging. If you’re looking for FY27 upgrades, private banks are the strongest candidates—credit growth is running ahead of estimates. Capital goods, hospitals, and a few IT names with strong AI deal flow also look promising. Digital consumer platforms are showing robust growth in Q1, which is another positive. Of course, there are risks. Consumer staples are still priced for a volume recovery that hasn’t shown up in the data yet. Crude-sensitive sectors are taking a direct hit to margins, and margin commentary versus May WPI at 9.68 per cent keeps coming up this season. Plus, some smallcap industrials are trading at 40 to 50 times earnings on order book stories that need everything to go right. That’s where you’ll see downgrades if the macro stays tough. But overall, the upgrade story is still intact in the right pockets.The recent rally in IT stocks has revived hopes that the worst may be over. Do valuations now adequately capture weak discretionary technology spending and AI-related disruption, or is it still too early to build a meaningful position in the sector?The IT rally has been very sharp—Nifty IT jumped 4.64 per cent in just one session in early July, thanks to short covering and a lot of excitement about Indian software exporters playing a big role in enterprise AI. But if you look at the actual results, they’re a bit more muted. TCS saw flat growth, with revenue in the Rs 71,700 to 72,300 crore range and margins still under pressure. Infosys is guiding for just 2 per cent constant currency growth, with operating margins holding near 21 per cent, which tells you that discretionary spending has stabilised but not really bounced back. My take is that the market has priced in this stabilisation, but not the full risk (or opportunity) from AI disruption, which could swing both ways for pricing and headcount. The rupee at 96.9 is a real tailwind—worth 150 to 200 basis points on margins, and I don’t think the market is fully appreciating that. I’d build positions only in the two or three leaders who are actually converting AI deals, and I’d do it gradually over the next two quarters. It’s too early to go overweight the whole sector, but also too late to have zero exposure.India is simultaneously dealing with volatile crude oil, a weaker rupee and uncertainty over the US Fed and West Asia. Which global variable poses the biggest risk to Indian equities, and which sectors would be most vulnerable if oil and the dollar remain elevated?If I had to pick the single biggest global risk for Indian equities right now, it’s crude—no contest. It’s even bigger than the Fed or the rupee, because it actually drives both. Brent has shot up above $100, up 36 per cent in just a month, as tensions in the Middle East keep rising and supply worries refuse to go away. For us, importing over 85 per cent of our crude, every $10 jump adds about 0.4 per cent of GDP to the import bill and goes straight into inflation. You can already see the impact—the rupee has weakened 2.38 per cent in the last month and nearly 12 per cent over the past year, with the RBI selling $6.1 billion in May after $8.9 billion in April just to defend the currency. Higher oil has also pushed the US 10-year yield to a two-month high of 4.64 per cent, which means the Fed is likely to keep rates higher for longer. If oil and the dollar stay up here, the most exposed sectors are OMCs (margins get squeezed), aviation, paints, tyres, cement (all hit by energy costs), and consumer staples (input and packaging inflation). IT and pharma exporters are your natural hedge in this environment.If you have to invest Rs 10 lakh today, how would you spread it across three major asset classes of gold, debt and equities and why?If I had Rs 10 lakh to allocate today, I’d go with Rs 5.5 lakh in equities, Rs 2.5 lakh in debt, and Rs 2 lakh in gold. For equities, I’d stagger the buying over three to four months, focusing on the largecap-heavy mix I mentioned earlier, and use this correction as a good entry point. Debt actually deserves its spot right now—Indian yields are attractive, and high-quality corporate bond and short-duration funds are locking in returns above 7 per cent, which gives you stability if equities stay choppy. Gold, in my view, deserves a full 20 per cent, not just a token amount. It’s trading near $4,044 an ounce, up 21 per cent over the past year, and the big drivers are still in place—central banks are buying, global inflation is sticky, and mine production growth is flat at just 1 to 2 per cent. The recent pullback from the January peak is a real opportunity, and with JP Morgan calling for $6,300 and Deutsche Bank above $6,000 by end-2026, there’s quite a bit of upside. In a world where crude is at $100 and the rupee is at 96.9, gold is not just insurance—it’s actually working for your portfolio.