ETMarkets.comMoreover, early signs of deflation in artificial intelligence (AI) indicate that making money in this area is happening more slowly than expected, especially for larger IT firms that have heavily promoted AI services.
Given the current geopolitical backdrop including the Israel-Iran conflict, global inflationary pressures, and political uncertainty, investors should prioritize a multi-asset strategy, says Viraj Gandhi, CEO, SAMCO Mutual Fund.”This is not the time to be overly aggressive. The path lies in maintaining a diversified portfolio that can absorb shocks and still participate in potential upside,” he said.Edited excerpts from a chat:How are you reading the current market setup? Is this a time to be cautious or bold?The current global situation remains uncertain given how the war situation is evolving. One needs to be cautiously optimistic, however, geo-political developments in the Middle East are likely to influence near-term market sentiment, with any signs of de-escalation being closely monitored. India has proved to be a resilient market with astute economic fundamentals, growing GDP, tamed inflation, and healthy foreign exchange reserves. Its solid consumption base, improving manufacturing sector, and ongoing reforms position is poised for long-term growth. However, in the wake of ongoing global uncertainty, it would be wise for investors to take a careful and selective approach in the short to medium term.What themes or sectors are offering the best risk-adjusted returns right now, in your view?The pharmaceutical sector presents strong opportunities for investors thanks to solid domestic fundamentals and positive global trends. In today’s geopolitical climate, the China+1 strategy is becoming more popular as global companies try to diversify their supply chains away from China. This shift gives India a strategic edge because of its strong position in making generic drugs, solid research and development capabilities, and cost-effective production methods. With a reputation for high-quality medicines at competitive prices, the Indian pharma sector is set to play an even larger role in global healthcare. Domestically, rising healthcare awareness, increased government spending, and higher demand for affordable medicines are also boosting the outlook.Live EventsPrivate sector banks have been in momentum, and they continue to offer valuation comfort relative to other pockets of the market. With resilient fundamentals, healthy balance sheets, and improving credit growth outlook position them well for the next leg of sustained performance. Further, the recent RBI rate cut accelerates prospects of the banking sector, especially private sector, by reducing credit costs and potentially boosting loan demand. This makes the sector an attractive option for investors seeking both stability and growth. How do you approach asset allocation in times like these? If you have Rs. 10 lakh to invest, how would you divide it in between stocks, debt and gold/silver.Within the Indian markets, currently the valuations are a bit stretched in several pockets especially in SMID segments. At the same time, gold has outperformed this year, acting as a safe haven amid rising global uncertainty, while silver has also seen a sharp rise in prices. These trends underline the importance of a diversified investment approach. Given the current geopolitical backdrop including the Israel-Iran conflict, global inflationary pressures, and political uncertainty, investors should prioritize a multi-asset strategy.Diversification across asset classes can help mitigate risk during such turbulent times. In such an environment, multi-asset funds become an ideal choice for the consumer as they offer exposure across equity, debt, commodities, and precious metals i.e., all asset classes within a single product. These funds provide automatic rebalancing, professional management, and dynamic allocation, which is especially useful during times of elevated volatility. This is not the time to be overly aggressive. The path lies in maintaining a diversified portfolio that can absorb shocks and still participate in potential upside.Within financials, the market seems to be favouring PSU banks and NBFCs over private banks in this rate cut cycle. Your thoughts?Nudging the trend, RBI appears to have adopted a pro-growth monetary policy stance. The central bank seems to have front-loaded policy actions with a slash in the repo rates. Post the change in monetary policy stance, large private banks started trimming their savings rates. Even large PSU banks have joined the bandwagon and were quick this time to slash the savings rates. This certainly suggests that the banking sector is focused on cushioning the NIMs. While systemic credit growth remains the centrepiece, with RBI’s strong push on liquidity, lower and stable rate environment, credit growth appears to have bottomed-out. Given the valuation gap of private banks and PSU counterparts has always remained elevated, current inclination towards PSU banks appears to just narrow the gap.IT stocks have bounced back in recent weeks. Do you think that the momentum is here to stay?IT stocks have bounced back in recent weeks due to several factors, but it is unclear how long this trend will last. On the positive side, signals from the US Fed about two possible rate cuts this year are good news for Indian IT companies. Lower interest rates usually encourage tech spending and make offshore services more attractive. Mid-sized IT firms are in a strong position in this environment because they are agile, cost-effective, and can take advantage of digital transformation deals. These companies are seeing strong deal activity and stable margins, indicating they could keep growing. However, there are challenges that might limit a widespread rally. Economic conditions in major markets, especially Europe and the US, are still uncertain and could slow down large tech spending.Moreover, early signs of deflation in artificial intelligence (AI) indicate that making money in this area is happening more slowly than expected, especially for larger IT firms that have heavily promoted AI services. These bigger players are also facing challenges from older business models and longer decision-making processes, which could affect their growth in the near term.(You can now subscribe to our ETMarkets WhatsApp channel)
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