India Seen as Stable Core Amid Global Volatility; Time to Capitalize, Not Capitulate

India Emerges as a "New Stable Core" Amid Global Volatility

India is gaining a reputation as a "new stable core" in an increasingly unpredictable global environment, as geopolitical tensions and energy shocks impact financial markets, according to the latest monthly note from Quant Mutual Fund. The fund house, led by Sandeep Tandon, observed that amidst military action by the United States and Israel on Iran, global equities experienced broad-based corrections, including declines in the S&P 500, Nifty 50, Nikkei 225, and KOSPI, while bond yields rose and commodities turned volatile.

The VIX index, a popular gauge of fear, jumped more than 75% early in the month, reflecting intense investor uncertainty. Despite stress in domestic markets, the fund house interpreted this as a potential turning point. "We are seeing signs of capitulation in Indian equities," it said, adding that this suggests "the worst is behind us." The fund house clarified that volatility is part of market adjustment rather than dysfunction, noting that "heightened volatility is not necessarily a reflection of market dysfunction."

Maintaining a positive view on India, the fund house emphasized that "with nominal GDP growing twice as fast as China's, Indian equities remain a premier global investment." It expects an improvement in the earnings cycle supported by reforms and macro stability.

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Portfolio Positioning

The fund house has increased equity deployment, capitalizing on attractive valuations. Its latest portfolio remains tilted toward large-cap stocks, with selective additions in mid- and small-cap segments. The fund house remains constructive on various sectors, including energy, large infrastructure, NBFCs, insurance, asset management companies, private sector banks, hotels, pharmaceuticals, telecom, and consumption themes, including FMCG and food processing.

Looking ahead, the fund house believes that "down the line in a few quarters, this could very well turn out to be the biggest buying opportunity since the COVID-19 pandemic." It advises investors to focus on extremes of market sentiment to identify opportunities and rebalance portfolios.

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