Stick to large-caps, disciplined asset allocation: 4 top mutual fund managers reveal how investors can navigate on-going stock market volatility, global uncertainty

Time of India

30-06-2025

Sankaran Naren,ED & CIO, ICICI Prudential AMC
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Nilesh Shah,MD, Kotak Mahindra AMC
Nimesh Chandan,CIO, Bajaj Finserv AMC
Chirag Mehta,CIO, Quantum AMC
India is not at the epicentre of the current geopolitical tensions, so the direct impact has been relatively limited. Of course, if tensions were to spike significantly—particularly if crude oil prices were to surge—it could have a negative effect on our markets. So far, we have seen crude prices spike and then cool off. Our overall investment framework over the past 20 months has focused around diversification and asset allocation. This has worked well in volatile market conditions, and we haven't found the need to change our basic core approach.We are currently in a moderate return environment across asset classes. Initially, we thought that gold and silver had significant return potential—and they have delivered strong returns. But looking ahead, we find it difficult to identify any one asset class that could deliver outsized returns. Even Indian equities, which did outperform earlier, are now delivering more moderate returns, in line with our expectations from a couple of years ago. At present, it is challenging to pinpoint any one asset class with big return potential in the near term.This is the time to take a balanced approach. Instead of concentrating only on high-risk areas, investors should consider large-cap or flexi-cap strategies, and maintain a sound asset allocation plan. Expectations also need to be realigned— from the high returns seen between 2020 and 2024, to more moderate returns going forward. That's why we are strong proponents of hybrid strategies and also believe in SIP investing in flexi- and large-cap oriented funds.Such tensions add volatility , but many stocks offer a margin of safety via strong growth and reasonable valuations. Ignore the noise and focus on the fundamentals. There are events happening in geopolitics at a rapid pace and accelerated scale which are unpredictable. There is no way we can position our portfolio for every global event. We can only respond to such an event. Our focus is on long term outlook. We focus on building portfolios of companies which are growing faster and which are available on reasonable valuations.High conviction in consumer discretionary, driven by tax rebates, lower EMI burdens, and the Eighth Pay Commission . Also, we are favouring stocks which can deliver above-expectation growth at reasonable valuations.Stick to disciplined asset allocation: buy cheap, sell expensive. At the current stage, we prefer large-cap equities at fair value, Gilts with over 7% yield for carry or performing credit AIFs, and gold in precious metal. More importantly we expect moderate returns in all asset classes over two to three years.As things stand today, we are not worried about any significant negative impact of the Middle-east tensions on India. The Brent Crude price, which may impact inflation and input prices for some companies, has corrected. As far as positioning is concerned, even before these events, we have been positive and overweight on domestic sectors. So we continue with the same.Our top down research starts with identifying mega trends that can impact economies, businesses and companies. We look for opportunities where the valuations have not completely discounted a particular mega trend, and we look to invest in those areas. If there is a significantly large theme which is positively impacted by mega trends, we launch a separate fund for the same. Currently, we have only two such funds: Consumption and Healthcare Sector wise we are positive on BFSI, Consumption, Industrials and Healthcare . We are bullish on Indian equity market and believe that Indian markets provide a strong case for growth and diversification to global investors. There is a diverse pool of sectors contributing to the overall profit pool thereby reducing earnings volatility. Valuations have corrected in the last one year and many pockets are attractively priced.Gold is a good diversification in investment portfolios. However, after a sharp run up in the last two years, a near term correction in prices cannot be ruled out. Typically, when global uncertainty reduces, demand for safe havens like gold also declines.Most geopolitical events have remained region-specific or short-lived, with limited impact on India's markets. Two key metrics to watch out for are the rising crude oil prices and defence spending, which could divert funds from growth and social initiatives. Unless there's a significant rise in either, India's growth trajectory is unlikely to be affected.Thematics are generally the flavour of the season, but India's core structural theme lies in its potential for 6.5–7% real GDP growth. This translates into rising per capita income and evolving consumption patterns that significantly benefit underpenetrated sectors. Broadly, India's long-term secular themes revolve around domestic consumption, infrastructure, and exports.Indian market remains one of the few where economic growth translates into strong returns. As a result, it trades at a premium to peer emerging markets. However, following some price and time correction, valuations have moderated—large caps are now near long-term averages, while mid- and small-caps still appear expensive. Our strongest convictions lie in BFSI, consumer discretionary (such as autos), and technology.Given the current geopolitical uncertainty, gold remains a vital portfolio diversifier. Rising deficits and unsustainable debt—likely to worsen under Trump's policies like the 'one big beautiful bill'—are eroding confidence in the US economy. This could weaken the dollar and support gold prices.