ETMarkets Smart Talk: From Gold to large caps—where smart money is moving to build wealth, Ashutosh Tiwari decodes

Time of India

05-05-2025

In this edition of ETMarkets Smart Talk, Ashutosh Tiwari, Managing Director and Head of Equities at Equirus Securities, offers a sharp lens into where the smart money is flowing in today's volatile market.
From the quiet but powerful moves in
gold
reserves by global central banks—especially China—to the relative value emerging in
large-cap stocks
, Tiwari breaks down how
investors
can realign their portfolios for long-term
wealth creation
.
He also shares why mid and
small caps
demand caution, where FIIs are placing their bets, and why sectors like financials, manufacturing, and rural consumption are likely to outperform. Edited Excerpts -
Thanks for taking the time out. We are seeing some volatile swings in the markets, thanks to the back-and-forth from Trump on tariffs and now some geopolitical concerns amid tensions between India and Pakistan. How are you looking at all this?
A) While tariff related concerns have abated a bit, and we are unlikely to see very high tariffs but even a 10% tariff which is imposed as of now will cause inflation and therefore recessionary fears in USA and growth moderation across the world is a likely scenario.
Post Pahalgam attack, general expectation is that India will respond in some way due to public outrage. Amid these uncertainties, markets are likely to remain volatile in the near term.
Q) It looks like we have entered a low-interest-rate environment. What should the asset allocation strategy be for an individual in the age bracket of 30–40 years?
A) While markets have corrected, they still are not very attractive, therefore investors should keep a diversified portfolio with a mix of Equity, gold and debt.
In equities, portfolio should be more focussed towards
large caps
where valuations are reasonable vs historical and less towards small and mid caps where valuations are still higher than historical average.
Despite the run up, gold remains a good asset class to invest in as with global uncertainties and Central banks reducing share of US treasuries and increasing exposure to gold, prices of gold is likely to remain in uptrend.
Q) What is your take on the results that have come out from India Inc., and what are your expectations for the next few quarters?
A) Earnings so far have been soft in most of the sectors as demand remains muted in domestic as well as overseas markets. We are still seeing FY26 earnings cut for most of the companies under coverage due to demand uncertainty.
Rural demand is likely to remain stronger than urban over next few quarters as rural incomes are improving due to good crop, forecast of monsoon is also good.
On the other side urban demand is likely to remain weak in the near term. However, on the positive side, due to recent fall in commodity prices, margins of companies should improve going ahead.
Q) Gold is back in the limelight as it hit the Rs 1 lakh mark in the physical market. Is it no longer just a safe haven but also a money-making machine? It has been outperforming equities for the past couple of years.
A) With global uncertainties emanating from tariffs imposed by USA, dollar index has been depreciating. As China is a big holder of US treasuries, overhang of selling in US treasuries remains and hence dollar is likely to remain weak. Post freezing of Russia's reserves of approx.
US$ 300bn by USA and its allies in 2022, many countries have been trimming US treasuries in their reserves and replacing them with gold, due to which share of gold in global reserves of countries have gone from around 13-14% in 2022 to 18-19% now. Gold is still around 5.5% of Chinese reserves, much lower than global average and hence gold is likely to remain strong.
Q) How should one be looking at the small- and mid-cap space in FY26?
A) While mid and small cap valuations have corrected from their last year peak, they are still more than one standard deviation above their historical mean and therefore one needs to be selective in mid and small cap space at current juncture.
Investors should look for companies that have good track record on cash flow generation and trading at reasonable valuation vs their pre Covid multiples.
In many cases investors look at the last 3–5-year average trading multiples and compare current multiples but it's not the right approach as last 3-year multiples were significantly higher than mean.
Q) Where is the value in the market after the recent fall we have seen?
A) Large caps are looking better in the current scenario vs mis-small caps in terms of valuations vs historical. We find better value in financials, cement, building materials and manufacturing companies.
The recent fall in commodity prices will aid margins in manufacturing and some related sectors. Apart from this, investors should look at rural consumption related stocks as demand is expected to be relatively better over there.
Capital goods and industrial companies fell sharply with moderation in capex as they were trading at a very high valuation, but post correction of these stocks are reasonably valued.
Q) How are FIIs viewing Indian markets? We have seen some net buying in the past few sessions, but for the month, FIIs have pulled out more than Rs 13,000 crore from the cash segment of Indian equity markets.
A) India is right now in a better spot compared to most of the countries in Asia due to higher dependence on domestic consumption vs exports.
With higher tariffs on China, even after assuming it comes down from current levels, India is likely to benefit from some supply chain shifts away from China.
India is likely to strike a trade deal with USA by rationalizing tariff on some items where duties are very high and increasing energy and defence purchase from US.
With the decline in the dollar index, INR has strengthened further supporting FII flows. We believe that FII selling, if any, will be moderate going ahead.
Q) Have you made any changes to your strategy or portfolio to balance out the volatility arising from external factors such as tariffs or geopolitical concerns?
A) As discussed above, financials, rural dependent sectors and manufacturing companies are looking better currently from an investment perspective.
Investors should avoid IT companies as there are question marks on their growth due to recessionary fears in the USA and valuations are still higher than average levels pre Covid. Investors should keep some cash to deploy if market corrects due to geopolitical tensions.