Home bias most definitely strengthened amid geopolitical tensions

Given the geopolitical situation worldwide, home bias has most definitely strengthened for investors, according to ASK Private Wealth's Vinay Jaising.

- Dipti Sharma & Srushti Vaidya

The firm's chief investment officer and head of equity advisory explained that the geopolitical risks are best assessed through three indicators: currency movement, the volatility index or VIX, and crude prices.

The US and India VIX have dropped sharply, signaling lower perceived volatility, according to Jaising, whose firm manages assets worth more than ₹44,000 crore as of May-end. Crude oil has corrected faster than expected, benefiting India.

The dollar index has weakened, while the rupee remains stable. Despite global headwinds, indicators like currency stability, falling crude prices and easing volatility suggest resilience in Indian markets. Which is why, as Jaising puts it, "India is relatively insulated".

Still, he believes in maintaining a balanced allocation.

Edited excerpts:

Where does your inclination lie in terms of market cap? Do you believe the broader market offers greater alpha potential? Yes. When you compare 4,000 companies to just 100, the chances of finding alpha in the broader universe are higher. Also, the top 100 companies are heavily researched, whereas many of the 4,000 others are under-covered. That's where you might find market leaders in niche segments that aren't large caps yet. India's 100 largest companies are considered large-cap, but even the 400th company can be a billion-dollar business. So, should a billion-dollar company really be called a small cap? That is a key question.

For us, it is about backing market leaders or those on the path to becoming one, with strong strategies, good industry positioning, visible profitability, manageable regulatory risk, solid cash flows, and healthy return ratios. If all that aligns with our internal prescribed parameters and the valuation looks attractive, both fundamentally and quantitatively, then we are interested. If that company happens to be a small-cap, that is fine. The core question is: Will this company create value for our investors?