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Kolkata: The Indian market is passing through a macro scenario marked by robust economic growth, ample policy support, fiscal consolidation efforts and multi-decadal low retail inflation. However, there are a few sources of uncertainty too such as fluctuating FII investments, valuation concerns lingering in some pockets, earnings disappointments in some instances and lingering geopolitical tension. In such a situation, many investors are eager to protect erosion of investments as well as generate alpha. IN such a climate Chintan Haria, principal - investment strategy of ICICI Prudential AMC tells TV9 how an investor can try to achieve it through a single investment.
Q: Despite India's strong macro fundamentals and supportive policy environment, what are the key triggers, domestic or global, that are contributing to heightened market volatility today?
A: India's macro picture is strong, with healthy growth, contained inflation and supportive policies. At the same time, markets face several sources of uncertainty. Valuations in certain segments are rich, so even small earnings disappointments can trigger sharp reactions. Global interest rate moves and changing expectations on rate cuts keep risk sentiment shifting. Geopolitical tensions and energy price moves add to periodic bouts of nervousness. Flows from foreign investors can also turn more volatile when global risk appetite changes. Together, these factors create a market that is fundamentally supported, but tactically choppy.
Q: Despite India's strong macro fundamentals and supportive policy environment, what are the key triggers, domestic or global, that are contributing to heightened market volatility today?
A: India's macro picture is strong, with healthy growth, contained inflation and supportive policies. At the same time, markets face several sources of uncertainty. Valuations in certain segments are rich, so even small earnings disappointments can trigger sharp reactions. Global interest rate moves and changing expectations on rate cuts keep risk sentiment shifting. Geopolitical tensions and energy price moves add to periodic bouts of nervousness. Flows from foreign investors can also turn more volatile when global risk appetite changes. Together, these factors create a market that is fundamentally supported, but tactically choppy.
Q: It it possible for Investors to have downside protection while still generating meaningful returns? If so, how can they approach this practically?
A: Some volatility is unavoidable in equities, but investors can try to reduce the impact of sharp falls. One way is to combine asset allocation with strategies that focus on quality and stability. The Nifty Alpha Low Volatility 30 index, tries to do this within equities. It selects stocks that have a record of outperformance, but also relatively lower price swings. This helps the portfolio participate in market up moves, while seeking to cushion drawdowns. Investors can use this as part of their core equity allocation, invest through SIPs in Fund of Funds based on the index. The aim is smoother compounding, not elimination of risk.
Q: Historically it has been seen that, stocks that show lower fluctuations often lag during bull markets, while high growth stocks can be volatile during corrections. Considering this, how does this strategy aim to deliver the best of both worlds, stability and performance? And what would the underlying index composition generally look like?
A: The Nifty Alpha Low Volatility 30 index brings together two ideas to create a balanced factor-based portfolio. It starts with a universe of large and mid sized stocks from Nifty 100 and Nifty Midcap 50. From this universe, it selects thirty stocks that score well on two factors, alpha and low volatility. Alpha aims at companies that have historically outperformed the market. Low volatility favours stocks with relatively stable prices. The result is a diversified portfolio of large and mid cap names, spread across sectors, which aims to balance performance with stability.
Q: Can we consider this strategy to be evergreen and applicable in any phase of the market?
A: A combined alpha and low volatility approach is best seen as an all weather building block rather than a short term trade. In strong momentum driven rallies, very high beta themes may run faster. During corrections or sideways phases, low volatility and quality often hold up better. The Nifty Alpha Low Volatility 30 index, offered through an ETF and a Fund of Fund, aims to stay invested in equities, but make the ride smoother through the cycle. For investors who can hold through full market cycles and accept periods of relative underperformance, it can work as a long-term satellite or part of the core allocation.
Q: What are the different ways investors can access this strategy?
A: Investors can access this strategy in two main ways. The first is through the Nifty Alpha Low Vol 30 Exchange Traded Fund (ETF). This trades on stock exchanges and requires a demat and trading account. It suits investors who are comfortable placing orders during market hours and may want tactical allocation. The second is through a Nifty Alpha Low Vol 30 Fund of Fund (FOF), which in turn invests in the ETF. This uses the mutual fund route, allows SIPs, and does not require a demat account. The ETF usually has a lower expense ratio, while the FOF offers easier access and automated investing.
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, INVITs, any form of alternative investment instruments and crypto assets.)
