Global Markets Resilient Amid External Pressures, Long-Term Growth Prospects Remain Intact: Prime Wealth Co-Founder

Market Volatility: Understanding Sources Key to Long-Term Wealth Creation

Prime Wealth Finserv's co-founder and executive director, Chakravarthy V., emphasizes the importance of understanding the source of volatility in the current market environment. According to Chakravarthy, heightened volatility in gold and equities is driven by reactions to uncertainty, rather than fundamental shifts in the underlying economy.

India's economic foundation remains strong, with growth expectations above 7% and inflation near the RBI's comfort band. Domestic investors are adding stability, with SIP inflows reaching an all-time high of ₹31,000 crore per month.

Market Strategy

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In the current market, each asset class is reacting to different triggers, making it essential to acknowledge these behaviors. Equities are being pulled down by global risk-off sentiment and oil prices, while gold is rising due to investor demand for safety. Bond markets are adjusting to the RBI's move to phase out temporary liquidity support.

Asset Allocation

Given the current market conditions, Chakravarthy advises against chasing the best performer of the moment. Instead, investors should focus on understanding the source of volatility and develop a strategy that takes into account the different behaviors across assets.

Equities Basket

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Small-caps have cooled after a long stretch of outperformance, with valuations closer to their historical averages. However, Chakravarthy cautions that the rebound, if it happens, will be selective, with some companies continuing to grow profits at 15-20%.

IT Sector

The IT sector has experienced an unusually sharp fall, with the Nifty IT index dropping 21% in February. While valuations have returned to normal levels, the sector is not out of the woods yet, with deal pipelines slow and attrition still a concern.

Market Outlook

Chakravarthy expects the domestic market to move forward, but with noticeable bumps along the way, driven by solid fundamentals. Key triggers for the year include crude oil prices, liquidity, and foreign flows.