Focus on Quality: Invest in resilient businesses amid uncertainty
1) Exposure to differentiated drivers of returns
Live Events
2) Tactical allocation: Potential risks and Underperformance over last few years indicate probable outperformance going forward
3) Strategic allocation: Long-term capital appreciation with lower risk
4) Rules-based investment framework
5) Lower costs
Conclusion
With the backdrop of several global and domestic geopolitical and macroeconomic headwinds facing Indian equity markets , discussions about Quality investing are re-emerging in investment circles. Quality investing constitutes investing in financially strong and steady businesses with are relatively stable during periods of market stress.The Nifty 200 Quality 30 Index includes top 30 companies from the universe of Nifty 200 Index on the basis of 'quality' score. Metrics used to define the Quality score include Returns on Equity, Debt/Equity ratio and Earnings Growth.Here are 5 reasons why one should consider a Nifty 200 Quality 30 index fund to build their Quality exposure:Compared to the Nifty 200, which is a traditional index based on market capitalization of underlying businesses, a factor-based index is built using a differentiated driver of returns – such as Momentum, Low volatility, Value or Quality. Factor-based strategies like a Nifty 200 Quality 30 index fund can complement plain-vanilla indices in an investment portfolio by improving risk-adjusted returns.Indian equity investors have experienced an almost one-way equity rally post the pandemic in 2020. While this has been rewarding, investors now risk becoming complacent. Market fortunes are fundamentally tied to the underlying economic situation, which, as we know, is cyclical i.e. economic upturns are followed by downturns, which are again followed by upturns. Momentum and Value themes have done well during the current upcycle and earnings spurt that we witnessed post-COVID-19. However, now we are in the final stages of that upcycle with signs of normalization becoming evident. As per ICRA , India's GDP growth for financial year 2024-2025 is expected to be 6.3% compared to 9.2% of the previous fiscal. Global factors such as elevated policy uncertainty and heightened trade and geopolitical tensions are also weighing on stock markets. In such an economic environment, the Quality theme that prioritizes investments in resilient, sound businesses with strong balance sheets, are likely to do better than momentum-driven stocks. Given that this style has relatively underperformed over the last few years, high-quality investments are available at reasonable valuations, increasing the probability of outperformance going forward.As of April 2025, the Nifty 200 Quality 30 TRI has generated higher average Rolling Returns over 1-, 5- and 10-years horizons compared to Nifty 200 TRI and Nifty 50 TRI. On a CAGR basis too, the Quality style has outperformed the mainstream indices since April 2025. The Quality theme also offers better downside protection during periods of market stress such as the taper tantrum of 2013, when the Nifty 200 Quality 30 TRI limited downside to 4% compared to Nifty 200 TRI's 14% and Nifty 50 TRI's 13%. Similarly, during the NPA crisis of 2015-16, the Quality-focused index outperformed its plain-vanilla peers by falling only 14% compared to their 20% and 21%.A rules-based strategy like the Nifty 200 Quality 30 index can enable systematic screening of businesses based on fundamentals. This helps avoid emotional decision-making, human biases or errors in times of market euphoria or panic selling.A Nifty 200 Quality 30 index fund uses systematic, rules-based models to identify and invest in stocks. Since there is no need for research or active management, expense ratios of these funds are typically lower.Quality as a factor should ideally be part of an investor's core, long-term oriented portfolio. Given the recent underperformance and as a measure to build resilience in the face of ongoing uncertainty on the global as well as domestic fronts, now is a suitable time to accumulate a Quality basket. Investors can stagger their investments into the Quality space over the next 2-3 years to eventually benefit over the medium to long term.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
23 minutes ago
- Mint
What happens if you use crypto to fund a foreign company?
I'm a resident Indian and I want to incorporate a company in Dubai to provide fintech advisory services in UAE. The consultant there has told me that I can incorporate a company in free zone simply by transferring crypto-currency as share capital. What are the tax implications and risks of carrying out such a transaction? Incorporating a company outside India, like in a UAE free zone, does not by itself lead to any direct tax implication in India. However, when the capital contribution is made using cryptocurrency, things change. Under Indian tax law, cryptocurrencies are treated as virtual digital assets (VDAs). So, if you use crypto to subscribe to shares in a foreign company, it qualifies as a transfer of a VDA—which is a taxable event in India. Such transfers attract a flat 30% tax (plus applicable surcharge and cess) on any gains made. Deductions are strictly limited—only the original cost of acquisition can be claimed. No other costs like exchange or transaction fees are allowed. Moreover, if the transaction results in a loss, that loss cannot be set off against other income, nor can it be carried forward. In effect, the loss becomes permanently disallowed for tax purposes. These transactions must be reported under Schedule VDA of your Indian income tax return (ITR). Additionally, since you are acquiring shares in a foreign company, this investment must also be disclosed under Schedule FA (Foreign Assets) in your ITR. Beyond taxation, there are foreign exchange law implications. Under India's FEMA (Foreign Exchange Management Act) rules, making capital contributions to a foreign company using crypto is not permitted. Even if UAE allows it, doing so from India could mean violating FEMA—potentially leading to penalties and enforcement actions. In summary, while it may seem straightforward to invest in a Dubai company using cryptocurrency, Indian law imposes significant restrictions on such transactions. Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
&w=3840&q=100)
First Post
25 minutes ago
- First Post
Indonesia's envoy lauds local currency transaction deal with India as bilateral trade boost
Lauding the local currency transaction agreement signed between India and Indonesia , Ina H. Krisnamurthi, the Indonesian Ambassador to India & Bhutan, noted that the initiative is already set in motion. The remarks from the Indonesian envoy came as she announced the 40th edition of the Indonesia Trade Expo. The event will take place in Jakarta on 15 and 19 October 2025. On Monday, the Indonesian ambassador and the country's prominent delegation gave an insight into what's in store for the October event. 'On Indonesian trade outlook, the global demand for commodities like steel, foil and gold is steadily increasing while the digital economy is expected to experience significant growth, potentially reaching USD 150 billion by this year. Indonesia has a long-term strategy focused on digital transformation, energy transition and social resilience. Similar to India, aiming for a more sustainable and inclusive economy are sectors which may be attractive to our Indian partners,' Krisnamurthi said at the start of the press interaction. STORY CONTINUES BELOW THIS AD Image Source: Firstpost 'According to the World Economic Forum, the combined GDP of Indonesia and India is around USD 8.3 trillion. The estimated GDP of India and Indonesia, which both share the same number, is more than USD 4.1 trillion. With a combined population of 1.7 billion, and each of us has more than 60 per cent of the population youth, avenues for collaboration between Indonesia and India are immense,' she added. In her speech, the Indonesian envoy noted that trade expos like these become important to promote trade and cooperation among countries around the world, especially amid global economic uncertainties. 'The World Bank, early this month, issued a report which has projected the global economy to grow at 2.3 per cent in 2025, the weakest growth in 17 years, excluding the outright global recession. The report, however, said that the global growth would rebound faster than expected if major economies are able to mitigate trade tensions,' she explained. Local Currency Transaction Agreement already in motion: Indonesian Envoy During her address, Krisnamurthi lauded the local currency transaction agreement, signed between India and Indonesia in March 2024. 'For me, it was a very proud moment when our central bank signed the local currency transaction agreement in March 2024, which allows for direct settlement of transactions in local currencies as well as to simplify and reduce the cost for businesses cooperating with India and Indonesia. She mentioned how Mayban Indonesia, a financial service entity, has an existing presence in India and is working to strengthen its position as a preferred trade partner in the ASEAN region. 'Maybank Indonesia is the first bank to settle transactions in both Indian Rupees and Indonesian Rupiah,' she said. When Firstpost asked the ambassador how soon Indonesia expects the agreement to boost bilateral trade with India, the Indonesian envoy noted that the process is already in motion. 'It's already on the roll now. I talked to Maybank Indonesia in Dubai. They always said that the transactions, the trade transactions , are already in place,' Ambassador Krisnamurthi told Firstpost. STORY CONTINUES BELOW THIS AD 'But the transactions are not at the volume that we want. Maybank Indonesia and Indonesia also need to increase their assets, including that, because the RBI wants their assets to be bigger so that they can do more transactions. But, it's already on the road.' 'We hope that if they are joining the trade export and also meeting with Indian businesses, then the transaction will be there. Also, I'm looking forward to seeing their asset increase if they are not coping with the mandatory volume of assets that RBI, your central bank already mentioned, they cannot do it because they have to have a certain number of assets to be able to set the transactions in motion,' she added. Disparity between India and Indonesian investment: There is more to the story It is pertinent to note that the Indian investment in Indonesia is around $54 billion, which is primarily channelled through Singapore. Meanwhile, Indonesia has invested a cumulative total of US$658.64 million in India as of September 2024. When Firstpost asked Ambassador Krisnamurthi about the disparity, she noted that there is more to the story. 'There is a discrepancy in the numbers between our data and Indian data, that's the first thing which is prevalent to note. Second, you need to understand that an Indonesian company that enters the Indian market is also registered by their stock exchange in Singapore,' she averred. STORY CONTINUES BELOW THIS AD 'So, the registration company is Singapore. But the owner is Indonesian. So, many of the numbers do not reflect whether it's owned by Indonesians or not. They have offices right in Singapore, which is why they entered India with a Singapore office, not an Indonesian office,' she furthered. While speaking to Firstpost, Nugroho Priyo Pratomo, Director of the Indonesian Trade Promotion Centre in Chennai, noted how several Indonesian companies have a significant place in the Indian domestic markets. 'So, let's take an example. For Indonesia's F&B companies in India, we have Nabati in Chennai, and we have Mayora in Hyderabad. And we have Dundun in Bangalore. We also have some shipping companies from Indonesia, interested in the Indian markets,' he said. 'Indonesia's current undertaking is to enhance its infrastructure to instil more confidence in how to place the investments in India itself. So, recently, many Indonesians have also been interested in investing in India. But we still have to focus more on what is the best option to get the deal,' he added. STORY CONTINUES BELOW THIS AD Eko Santoso Junor, Consul for Economic Affairs, Consulate-General of Indonesia, Mumbai, also responded to Firstpost's question, noting that while the Indonesian investment in India is strong, it is 'unfortunately not publicised to a greater extent. 'For instance, here we talk about companies registered in Singapore. So, we might skip the public radar. But, when we talk to people like Indians who are already in Indonesia, anticipating working in Indonesia, maybe it's like the paradox of similarity, where we're so similar in culture and many aspects,' he told Firstpost. He also noted that 'a market as big as India also comes with logistical and clerical challenges.'
Time of India
28 minutes ago
- Time of India
India's April-May fiscal deficit at Rs 13,163 crore, narrows on-year to 0.8% of FY26 aim
India's fiscal deficit for the first two months of this fiscal year through May stood at 13,163 crore rupees, or 0.8% of annual estimates, government data showed today. The fiscal deficit narrowed from 3.1% reported in the comparable year-earlier period. While announcing the federal budget for this fiscal year that started April 1, Finance Minister Nirmala Sitharaman set the fiscal deficit target for 2025-26 at 4.4%, in line with the Indian government's commitment to narrow the budget gap to below 4.5% by fiscal 2026. India's fiscal deficit for FY25 stood at 4.8% of GDP, meeting the revised estimate. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Book Your Daily Profit By 11 AM With This Superclass By Mr. Bala TradeWise Learn More Undo The lower fiscal deficit target for 2025-26 was expected on hopes of strong tax collections, despite the government's continued capex push that is crucial to shore up consumption and create jobs and help India achieve its aim to be world's third largest economy by 2030.
