Edited excerpts from a chat:
Given the underperformance of equity in last one year and sheer outperformance of gold and silver, multi-asset allocation funds are seeing higher interest these days. What has been your strategy at DSP Multi Asset Allocation Fund? Do you think precious metals will outperform stocks for the rest of 2025?
We are living in a VUCA world—marked by volatility, uncertainty, complexity, and ambiguity—and this is unlikely to change anytime soon. Volatility and uncertainty may even intensify. At the same time, investors’ risk appetite and temperament vary widely. Not everyone can sit through prolonged periods of low equity returns.In such an environment, multi-asset allocation funds provide valuable diversification, making them highly relevant. Precious metals may have already seen much of their rally, but periods of uncertainty can still support their performance. While we expect equities to catch up toward the end of 2025, it is prudent not to take a one-dimensional view and instead maintain a diversified approach.
As far as equity is concerned, do you think that most of the time correction is behind us and it is now time to be overweight equities and deploy spare cash?
While it is difficult to precisely call the market bottom or the exact length of a consolidation phase, it appears that some more consolidation may continue until corporate earnings growth visibility improves. A large part of the time correction seems to be behind us, and India’s relative performance versus other emerging markets supports this view. As growth recovery becomes clearer, we believe the market will begin to look for a positive direction.
GST is being seen as the biggest trigger for the market in 2025. Would you agree? And how has your portfolio changed since the new GST rates have been announced?
I believe GST rationalisation is a much-needed and positive step, especially after a period of consumption stagnation. This move should gradually lift demand momentum, with clear benefits for sectors such as autos, consumer durables, and lending institutions. Our portfolios are well positioned for this shift, with meaningful exposure across autos, auto ancillaries, lenders, and a broad consumer basket, enabling us to participate in the potential upturn.
Auto is being seen as the biggest sectoral winner of GST reforms. How would you play the auto cycle which in itself is quite broad with tractors, ancillaries, CVs and PVs players?
We need to take a broader approach within autos—looking at OEMs and ancillaries that are diversified across product segments and well-positioned for multiple technologies, including EVs. At present, we are more constructive on two-wheelers and passenger vehicles, while the benefits for commercial vehicles are likely to play out more gradually. It is also worth noting that most auto OEM stocks have already seen a sharp run-up. For further upside, they will need to deliver growth meaningfully above expectations. Otherwise, the better way to capture the opportunity may be through auto ancillaries.
IT has not only been the worst performing sector of 2025 but the outlook now looks more grim given the noise around the HIRE Bill. Is that a serious threat from a longer-term perspective? How much weightage are you giving to IT in your portfolios?
We are currently at an equal weight position on the IT sector, supported by attractive valuations. While risks such as the proposed HIRE bill are creating noise and outcomes are hard to predict, we believe the structural importance of Indian IT to global companies provides a strong cushion.
The sector is vital for India, contributing 7.3% of GDP and employing 5.8 million people. Globally, it is equally critical—60% of Fortune 500 companies have established GCCs (global captive centers) in India. With its deep pool of high-tech talent, India accounts for significant part of global sourcing market. Given the absence of comparable talent scale elsewhere, we see limited medium- to long-term risk to the Indian IT services industry.
We will be having the Q2 earnings numbers flowing in a month from now. Do you think the September quarter would be the last of the single-digit earnings growth and we can expect double-digit growth from Q3 onwards?
Yes, my assumption is also that the September quarter will mark the bottom for earnings growth. Beyond that, we expect a recovery supported by several factors: GST rationalisation, lower interest rates, income tax benefits, a favourable base, and improving demand as the festive season begins.
Within the consumption basket, how would you go about picking winning stocks?
The landscape is becoming increasingly tricky. We need to keep tracking wallet-share shifts as consumption patterns evolve. The younger generation, particularly millennials and Gen Z, are far more digital in their behaviour—using technology and online platforms extensively. Customer loyalties are also weaker, with consumers ready to experiment with new brands. The proliferation of online brands has further intensified competition.
In this backdrop, we are focusing on businesses that remain relevant from a growth and capital efficiency perspective. Autos and select consumer durables—such as air conditioners and electronic manufacturing seems to be long term beneficiaries. We also see consumer lending institutions gaining indirectly, which makes us positive on the space.
In addition, we are witnessing financialisation of savings, with rising interest in areas like capital markets & insurance, which we see as another important growth theme.
Besides consumption and auto, which other sectors do you believe will lead the next leg of market growth, and what’s driving your conviction in them?
Beyond consumption, we are seeing new opportunities emerge in the semiconductor value chain. Concrete activity is now visible, with companies showing intent to build both capacity and capability. While it remains early and uncertain which players will capture the most value, this space has the potential to become a meaningful investment opportunity over the next 3–4 years as domestic manufacturing gathers momentum.
Another major theme is the energy transition. With climate challenges intensifying, large-scale investments are flowing into renewables, storage, green hydrogen, and grid modernisation. This evolving ecosystem is set to create strong, scalable businesses that could drive the next wave of growth in Indian markets.
If you had Rs 10 lakh to invest in the market right now, how would you spread it across gold/silver, equities and debt?
Equities would be 60%, precious commodities like gold & silver 25% and balance in debt.
Lastly, what’s the one contrarian idea you’d back for the next 12 months?
I believe the IT sector has been under pressure from the global geopolitical-driven slowdown. Over the next 12 months, we expect conditions to improve, giving companies better visibility on deal flows and growth. This makes the sector an attractive contrarian bet at current levels. Institutional holdings in IT are also relatively light, which adds to the potential for re-rating as sentiment turns.
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