Fixed Income is portfolio's seatbelt against volatility: Chakri Lokapriya of LGT Wealth India

Economic Times

2 days ago

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In this edition of ETMarkets Smart Talk, Chakri Lokapriya, CIO – Equities at LGT Wealth India , explains why fixed income should be viewed as a critical stabilizer in any investment portfolio Comparing it to a 'seatbelt' that quietly cushions against market volatility, Lokapriya highlights the importance of allocating 20–30% of portfolios to high-quality bonds , especially in today's uncertain global environment.He believes fixed income is not just about safety but about steady compounding and risk management, making it a foundational element in long-term wealth creation. Edited Excerpts –A) The scene is the place for a lovely outcome of markets moving higher, and closing CY2025 with a 10% to 12% gain. However, the big elephant in the room is US Tariffs India is expected to conclude the talks by the end of July 2025. And it is evident that India would not budge on allowing access to US agricultural or dairy products, as it is detrimental to the livelihood of 60% of India's farmers.A tariff deal without the above two items is the big event to watch for and markets would take a decisive directional move based on the outcome of the U.S. Tariff deal with India.A) We are running well diversified portfolios with good earnings visibility.Furthermore, we are taking a balanced approach in rebalancing portfolios to volatile decisions such as raising and lowering tariffs.A) 2020 was a watershed moment for India's corporate in managing cash flows and maintaining sufficient liquidity to counter uncertain periods.Since 2020, many Indian companies have balanced capital expenditure versus profit growth admirably well.Moreover, a number of Sunrise sectors, old-world in many respects such as Defence, Railways, Semiconductors are structurally allowing Corporate India's profits to growth faster than the GDPA) In Electronics and Semiconductors: growth is Fuelled by import substitution ,PLI. US and Europe shifting sourcing from China to India.China is the leader in Electronics System Design and Manufacturing (ESDM), (40% of output and 30% of exports). India stands at 2% therefore huge room to grow.The rising share of electronic content across automobiles, CD, Industrial translates into a higher addressable market for EMS. India semiconductor market size to surpass $55 bn by 2026.India's electronics market is at $150 bn, to grow to $500 bn and create 6mn jobs by 2030. PM Modi's goal 100% of electronic manufacturing in India.A) In an uncertain world, fixed income is your portfolio's seatbelt—quiet, steady, and critical when volatility hits. Allocating 20–30% of your portfolio to bonds can help cushion equity swings and deliver a reliable income.Today's environment of moderating rates and strong credit spreads makes this a smart time to lock into high-quality instruments, such as government bonds, AAA corporates, and select high-yield credits.Think of it as earning while you wait—letting your capital work quietly in the background. The goal isn't just safety—it's smart, steady compounding through cycles. In a well-built portfolio, fixed income isn't optional—it's foundational.A) Energy as a sector will be in the spotlight in 2H2025. India with 1.4 billion population, urbanization, 22 GW by 2032, net-zero by 2070. Retrofitting coal-fired plants for efficiency and nuclear hubs.Renewable energy, targets of 500 GW by 2030 (50% non-fossil fuel electricity), with PLI, waived transmission charges, National Solar Mission, Hydro and Wind. Nuclear power generation target of 100 GW by 2047.For managing solar and wind energy, Battery energy storage systems (BESS) demand to reach 60 GW by 2030. India's abundance in thorium, uranium, solar, and wind reduce import dependency.A) Yes Indeed, India was and is a stock pickers market with over 6,000 companies to select from. We aim to look for stocks that have strong earnings visibility due to an acceleration of business, recovering balance sheets.A) Past two years have had multiple war-like situations and the US too joined the conflict.And the tariff has left countries finding ways to control inflation. Against this backdrop, Gold continues to be a hedge against inflation and an investment vehicle.A) The cumulative 100bps rate cut significantly reduces borrowing and working capital costs, especially for capital-intensive sectors like power utilities (thermal/renewable) and mining.Infrastructure spending is poised to benefit ahead of the upcoming budget, potentially accelerating revenue growth by 12–18%. The mid cap sector is expected to grow at 17% to 20% outpacing 8% to 10% growth of the large cap.A) Telecom as a sector has huge levels of debt, and regulatory and court interventions and therefore remain cautious.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)