Why Market Volatility is the New Normal
According to Rohit Jain, the current market volatility is expected due to strong domestic inflows contrasted by an unfavorable risk-reward dynamic. The equity markets have had a stellar run over the last two years, but soaring valuations are causing pressure for corrections. Liquidity continues to support buying dips, keeping volatility active.
Upcoming major events like the U.S. presidential elections, interest rate cuts, Indian assembly elections, and the Union Budget add uncertainty to the market outlook.
2QFY25 Earnings Outlook: What to Expect
Despite challenges like heatwaves and elections in Q1FY25, early signs indicate sequential demand recovery fueled by pent-up orders and a strong monsoon benefiting agricultural seasons.
Khanna advises monitoring management commentary on execution acceleration as a key factor in meeting FY25 earnings expectations.
Sector Preferences: A Balanced Approach
- Overweight: Capital Goods, Infrastructure, Metals & Mining, IT, and Healthcare — sectors benefiting from government spending, private capex, and defensive demand.
- Underweight: Autos, Retail, and Consumer Durables — facing pressure from high valuations and intense competition.
- Contra Call: Chemicals — selective companies with completed capacity expansion poised for growth.
The Shift in Investment Strategy
Purnartha One Strategy has shifted to a more conservative, multi-asset approach over the past 12-18 months, focusing on risk mitigation and sustainable earnings growth.
Equity exposure was reduced from approximately 85% to 72%, positioning the portfolio to seize opportunities amid volatility.
The IPO Surge: What’s Driving It?
The recent surge in IPOs is fueled by a strong bull run and high liquidity, driving increased investor participation. While important for capital formation, Khanna cautions investors to remain diligent and risk-aware amidst market euphoria.
Client Concerns and the Post-COVID Investment Trend
With markets delivering robust returns since the pandemic, many investors seek to protect gains. This has led to increased interest in balanced, multi-asset strategies that reduce portfolio volatility.
Government focus on capacity generation has benefited manufacturing, building materials, and defense sectors, while consumer sectors are poised for growth.
Advice for First-Time Investors
Khanna advises new investors to prioritize risk management and consider lower-volatility, multi-asset strategies given current stretched market valuations.
Performance of Purnartha One Strategy
Though in operation for less than a year, Purnartha One Strategy has shown promising performance, with a time-weighted rate of return (TWRR) of 8.1% and 10.6% over the last three and six months respectively (as of August 31, 2024).