MUMBAI, May 18 -- As higher oil prices, foreign outflows and slowing corporate earnings growth weigh on markets, Indian investors may need to temper expectations from equities, according to Nilesh Bharkhada, chief investment officer at Kotak Pension Fund.

In an interview with Mint, Bharkhada said rising capital costs could pressure valuations further, while crude oil above $100 a barrel may trigger cuts to earnings and growth estimates.

Edited excerpts:

The current price hikes are modest compared to the sharp rise in crude oil prices. Elevated crude prices will either be absorbed by the government, if it expects prices to normalize soon, or passed on to consumers in a staggered manner. Either scenario would be inflationary.

Rising pet...