'Equities are no longer optional': Qode's Rishabh Nahar on navigating market uncertainty with quant strategy

Economic Times

30-04-2025

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In a world of macroeconomic uncertainty, rising interest rates, and shifting liquidity dynamics, fund managers are under pressure to rethink strategy. According to Rishabh Nahar, Partner and Fund Manager at Qode Advisors, the current global environment—especially with the US facing a massive debt refinancing challenge—could reshape financial markets for years.'$28 trillion of US debt needs refinancing in the next four years. If foreign buyers step back, the US may print $10–15 trillion more. That kind of liquidity infusion could dramatically inflate asset prices across the board,' says Nahar.Nahar believes the key to navigating such volatility lies in quantitative investing, but with a first-principles approach. He says, "Quant investing isn't about secret algorithms. People often think of quant investing as a black box spitting out multibagger stocks. But at its core, it's about first principles — owning businesses with strong earnings growth. We translate fundamental ideas like ROE, ROC, and promoter holding into structured, testable rules and see how they perform over time. That's what makes it quant."Now, unlike passive investing, which sticks to static rules, or active investing, which is subjective and based on human judgment, quant is dynamic and data-driven. It adapts to changing market conditions — whether it's growth, value, or gold-driven phases. In essence, it's the discipline of passive with the adaptability of active — but powered by logic and code."Distinguishing between, Nahar says:- Active investing involves deep fundamental analysis and subjective judgment.- Passive strategies follow static rules, like buying Nifty 50 via ETFs.- Quant investing, however, dynamically adapts to market conditions while staying data-driven and rules-based.On alpha decay—a common concern in the quant world—Nahar says it's only an issue if you're chasing patterns without logic. 'As long as your models are based on real business fundamentals and earnings potential, not just price patterns, alpha decay isn't a major threat.'Many people treat investing seriously but only as a side activity, spending maybe 20–30 minutes a day picking stocks. If you're not able to devote time consistently, it's better to invest via mutual funds or professional managers. However, if you're serious about wealth creation, there are many ways to generate alpha — one of the most effective being a multi-asset approach.In the last six months, while Indian markets struggled, US equities performed well. This highlights the importance of holding uncorrelated asset classes — large caps, mid caps, gold, and even global equities — to smooth out portfolio volatility.Investing is a long-term journey. If your horizon is 5–10 years, what matters is the compounded outcome at the end. You want to own growth-driven businesses and build a peaceful, sustainable investment experience. A multi-asset portfolio helps reduce drawdowns and emotional stress, especially during market corrections.Given where the US economy stands today, and the likelihood of printing $10–15 trillion over the next four years, equity exposure is no longer optional — it's a necessity. Back in 2020, $5 trillion led to 9% inflation. If more liquidity floods the system, all asset prices could inflate. Without exposure to equities or real assets, you risk silently losing wealth. Despite current valuations, Indian markets offer strong earnings visibility and meaningful upside over a 4–5 year horizon. Now more than ever, owning equities is essential.