Volatility to Persist in Markets Amid Near-Term Earnings Uncertainty

Market Volatility Expected to Persist Through Year

Geopolitical uncertainty is likely to continue affecting earnings recovery, with markets expected to remain volatile through the year, according to Rishi Kohli, CIO of JioBlackRock AMC. Kohli noted that while earnings growth had started to improve after a weak patch, the current environment has disrupted that trend, with the impact potentially extending into the second quarter if the uncertainty continues.

Kohli emphasized that until the uncertainty subsides, volatility will remain a persistent feature of the market. Even after clarity emerges, markets may take time to adjust to the temporary earnings impact. Despite this, he expects the downside to be relatively contained compared to last year, with a significant portion of the correction already having played out.

Instead of a sustained rally, Kohli expects a more fragmented market environment, with sector rotation and stock rotation likely to dominate the landscape. This suggests that investors will need to navigate shifting leadership across sectors.

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In this environment, Kohli flagged that performance dispersion across funds is likely to widen, with outcomes depending increasingly on strategy and allocation rather than overall market direction. He noted that the firm is preparing to launch a Systematic Investment Framework (SIF), a strategy that combines multiple approaches to manage risk and deliver relatively stable returns, making it more relevant when markets are volatile and directional clarity is limited.

The first SIF strategy is expected to be launched by the AMC in the coming months. On foreign investor flows, Kohli indicated that near-term sentiment could remain weak, but downplayed long-term concerns, noting that flows tend to follow market momentum and could return once earnings and returns improve.