Put up Views:
19
Fairness Market Insights:
And It All Falls Down…
Over the previous few quarters, we’ve persistently shared our view {that a} valuation reset was overdue in India, significantly within the mid and small-cap segments. This quarter, that reset lastly arrived with the sugar rush coming to an finish.
In the course of the quarter, Indian fairness benchmarks posted their fifth consecutive month-to-month decline, marking the longest dropping streak in almost three many years. For the three months ending March 2025, the BSE Sensex fell by 1.39%, whereas the BSE Mid-cap and Small-cap indices dropped by 11.02% and 16.34%, respectively. As anticipated, mid and small-caps corrected extra sharply because of frothy valuations.
A mix of common Q3FY25 earnings, sluggish financial knowledge, and protracted FII outflows weighed on the sentiment. Whereas the Union Finances provided some reduction with beneficiant tax giveaways, and the RBI adopted with a fee lower and liquidity assist, these measures weren’t sufficient to offset broader considerations.
The most important set off for the selloff? Rising international commerce tensions. Coverage flip-flops from the Trump administration led to heightened volatility, with international markets swinging between positive aspects and losses. Aid got here solely when a 90-day pause on tariff hikes was introduced, masking most main commerce companions, together with India. Nonetheless, sentiment stays fragile, particularly with US-China tensions flaring up once more.
This market correction opened up alternatives for us to realign portfolios in step with our strategic asset allocation framework. We’ve been advocating an equity-light stance as markets have been at elevated valuations. However we acted when the market corrected by round 10–15% from the September 2024 highs, and valuations in large-cap, value-oriented funds approached historic averages.
We largely managed by shifting allocations from debt to fairness inside present portfolios, as in comparison with the infusion of recent capital. This reinforces our perception in sustaining funds in mounted earnings in order that we will reply when markets current alternatives. At extra affordable costs, we will nibble in! Even in our very aggressive portfolios, we don’t have 100% allocation to fairness for a similar cause.
One factor this current correction has proven us is how rapidly market narratives can shift. Indian equities went from market darlings to international underperformers very quickly. It is a reminder that country-specific dangers are actual. Markets transfer in numerous cycles, and management rotates. What’s profitable right this moment may lag tomorrow. A globally diversified portfolio helps clean out these ups and downs by spreading publicity throughout areas and asset courses.
Debt Market Insights:
Simply when it appeared like nothing might cease the Trump momentum, the U.S. bond market despatched a transparent sign. U.S. Treasuries noticed a violent selloff triggered by Trump’s tariff bulletins in early April. This brought on large uncertainty, resulting in a spike in yields and a decline in market liquidity, elevating fears concerning the bond market’s fragility and functioning.
Inside days, the 10-year U.S. Treasury yield surged from beneath 4% to over 4.5%, whereas the 30-year yield briefly topped 5%. These strikes mirrored investor considerations about increased inflation because of tariffs and weaker financial development prospects.
Again dwelling, Indian bond markets remained comparatively steady through the turbulent time witnessed within the US. With inflation easing to a 5 12 months low at 3.34% in March 2025 and showing well-contained within the brief time period, the RBI delivered its first back-to-back fee cuts in almost 5 years. Consequently, the benchmark repo fee has come down to six%, and the coverage stance has shifted to ‘accommodative’, indicating that there could also be additional room for alleviating.
The GDP development forecast for FY26 has been revised down barely to six.5% (from 6.7%), whereas the inflation forecast was lowered to 4% (from 4.2%).
One other constructive improvement: beginning January 31, 2025, Indian authorities bonds have been phased into Bloomberg’s Rising Market Native Foreign money Authorities Index, constructing on their earlier inclusion in JP Morgan’s index in mid-2024. These inclusions have boosted international visibility, elevated overseas investor participation, and enhanced liquidity in India’s debt markets. That mentioned, we discover the broader development of slowing allocations to rising markets has tempered inflows to India as properly.
Within the present setting, we proceed to take care of a conservative stance on portfolio period, preferring maturities of as much as 1.5 years. We imagine longer-duration bonds at the moment supply an unattractive risk-reward profile, particularly given international uncertainty and the potential for volatility in yields.
For brief-term money administration, arbitrage funds stay a wise alternative given their superior tax-adjusted returns. Nevertheless, contemplating their tendency to exhibit volatility throughout sharp fairness market corrections, we suggest complementing them with ultra-short-term debt funds to take care of stability and liquidity.
Different Asset Courses:
Gold continued to do what it does greatest – act as a dependable portfolio diversifier. In the course of the January-March 2025 quarter, gold costs surged by 17.27%, reaffirming their position as a hedge amid ongoing international uncertainty.
As we’ve persistently advocated, sustaining a strategic allocation of 10–20% to gold can improve portfolio resilience, particularly in periods of heightened international financial uncertainty. This quarter was one other robust validation of that view.
Coming to actual property, the broader Indian housing market remained steady, with residential gross sales throughout the highest eight cities rising 2% year-on-year to 88,274 models through the January-March interval. However a pointy divergent development is observed beneath. Whereas inexpensive housing noticed a decline, premium and luxurious segments registered strong development, a mirrored image of evolving preferences amongst prosperous consumers.
Actual Property has change into costly, and we’re advising our purchasers towards recent purchases. Given a number of different components like illiquidity, cyclicality, worth volatility and longer holding intervals, we suggest protecting publicity inside 20–25% of your complete belongings.
Truemind’s Mannequin Portfolio – Present Asset Allocation
Private Finance Capsule:
How to stay in the game to let compounding create wealth?
Diversification to deal with uncertainty
Truemind Capital is a SEBI Registered Funding Administration & Private Finance Advisory platform. You may write to us at connect@truemindcapital.com or name us at 9999505324.