Book Profits in US Equity Funds If Overweight

Allocate 10–20% of equity portfolio to such funds despite the recent volatility

- HIMALI PATEL

The US equity market experienced a sharp sell-off this week amid concerns that President Donald Trump's tariffs and the resulting trade wars could trigger a recession. Major US stock indices recorded significant losses on March 10, 2025. Both the S&P 500 and the Nasdaq Composite Index have fallen above 10 percent from their recent highs, which means they have entered correction zone. Indian investors have significant exposure to the US market via mutual funds. Twenty-three funds in this category have total assets under management (AUM) of ₹45,685 crore.

Drivers of volatility

The recent volatility stems from uncertainty over the economic impact of tariffs and trade barriers. "The possibility of a trade war and its possible consequences on the US economy have led to market fluctuations," says Trideep Bhattacharya, president and chief investment officer-equities, Edelweiss Asset Management.

Tariffs imposed on Canada, China, and Mexico have led to retaliatory measures, sparking fears of disrupted supply chains and inflation. "The fear of increase in inflation and interest rates not falling as previously projected has led to unease," says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors. Concerns about a potential economic slowdown have also intensified. US markets have been trading at a premium. "Investors who have made substantial profits over the past two years may now be booking gains due to the prevailing uncertainty," says Dhawan.