New Delhi, July 13 -- A continuation of the conflict in West Asia could lead to further downgrades in corporate earnings, Sandeep Pandey, chief investment officer at SBI Pension Fund, told Mint in an interview. As companies face mounting margin pressures, they are likely to pass higher costs onto consumers, creating an inflationary environment, Pandey said. He added that currency volatility is another major risk, noting that if global interest rates rise faster than India's, it could put additional pressure on the rupee.

Given these compounding macro headwinds and stretched corporate margins, Pandey warns investors that overall return expectations from the stock market should remain moderate for the current financial year.

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