Stay disciplined in ‘Tempest’ markets; rebalance portfolios, says Jayesh Faria of Motilal Oswal Private Wealth

In an interaction with Kshitij Anand of ETMarkets, Faria emphasises that while such turbulent periods can unsettle investors, they are often temporary in nature.

He advises investors to stay disciplined, stick to their asset allocation, and actively rebalance portfolios to capture emerging opportunities.

Highlighting strong earnings growth and meaningful corrections across market segments, Faria believes the current environment could be a constructive entry point for long-term investors, provided they adopt a staggered and well-diversified investment approach. Edited Excerpts –

Q) What do recent geopolitical developments in oil-producing regions signal to global investors from a macroeconomic and global markets?

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A) Military Escalation involving the US, Israel & Iran has heightened risk around the Strait of Hormuz, a critical energy check point.Hence, brent crude has surged from $70-75 to above $100 bbl, while LNG prices spiked due to supply disruptions. This can lead to increase in inflation, wider current account deficit and pressure on currency for impacted countries.
For India, persistent currency weakness could amplify imported inflation and keep long term bond yields biased upward.
Q) What will be the broader economic and market impact of the sustained energy price increases and commodity volatility?
A) Higher energy prices are inflationary globally, raising transportation, manufacturing and utility costs. This could push bond yields higher, limit central banks policy flexibility and slow global growth; particularly in energy importing economies.

We have that’s why named our this month’s research publication as “Tempest” it symbolizes a phase of intense turbulence and volatility that, while unsettling in the moment, is typically temporary. The current market can be considered to be going through such a volatile storm.

Q) Given the recent market corrections, how should investors think about positioning in Indian and global equities today?
A) Markets have already reacted and we have seen downwards trend. We prefer Indian market as 42% of large cap stock, 60% of Midcap Stocks and 77% of small cap stocks have corrected more than 20% from 52 weeks high.

At the same time, we have seen earnings growth of double digit across segments, namely large cap Nifty 100 at 18%, Midcap 150 at 20% and Small cap 250 at 29%.

This gives us the comfort that market have corrected and earnings growth is moving positively upwards hence it is a good time to start participating in our markets.

Q) How can investors allocate into ETFs across equities, debt, gold, and international markets, and which global ETF themes should investors look at now?
A) ETFs are easier & cheaper instruments to participate in the market without worrying about choosing the individual stocks to invest in.

Hence, this should be used for tactical allocation and helps investors participate in beaten down sectors or market caps very quickly. One should definitely use this instrument to participate in current environment to rebalance their portfolio.

We recommend investing into global funds which participates in sectors such as such as technology, semiconductors, or global indices and ETFs, by doing their own due diligence while individual investor may not have capability or knowledge to do so.

There are enough funds available through Gift city route which investors can participate in.

Q) What role does rebalancing play in ensuring long-term wealth creation during volatile market phases?
A) Rebalancing becomes critical in this kind of environment and it is very important to stick to your asset allocation.

Having said that, it is tough to implement for example current equity valuation may be lower than desired allocation which requires one to invest in this time but environment around makes it difficult to implement the same.

We feel this is the key to long term wealth creation. Hence, we recommend investor to rebalance their portfolio and participate in the asset allocation which has differed from the original plan.

Q) What is the ideal approach to incorporate global exposure within a broader portfolio strategy?
A) We feel that India is growth market and has delivered double digit returns for long period of 30 years plus hence larger allocation should be in Indian market.

For the sake of diversification and future requirements, one can build 10-20% of their portfolio in global markets through funds.

Q) How should someone in their 40s look at phasing their investment and allocating fresh capital while maintaining a diversified portfolio?
A) If someone wants to deploy fresh capital, we would like to recommend staggered approach in Indian markets through their preferred instrument. It should be 50% allocation to Large cap or Hybrid Funds, 40% to Mid & small caps fund and 10% to Global funds.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)