The market is irrational right now

With 2024 drawing to a close, all eyes are now on Donald Trump's inauguration in January 2025 and what it will bring to the global financial markets. ANISH TAWAKLEY, co-chief investment officer for equity at ICICI Prudential Asset Management Company, spoke with Puneet Wadhwa in New Delhi about his hits and misses in 2024 as a fund manager, and the opportunities and key risks for the markets in the year ahead. Edited excerpts:

- ANISH TAWAKLEY, co-chief investment officer for equity at ICICI Prudential Asset Management Company

What have been your hits and misses in 2024 as a fund manager? Which investment strategies worked for you, and which ones didn't?

We did well in the banking sector, where we had very low weights at the start of the year and then increased our exposure during the year. We also did well to avoid the fast-moving consumer goods sector. Holding cash instead of investing in small and midcap stocks has hurt us.

The market is irrational right now, and you can't outperform by remaining rational in an irrational market. We are not chasing returns but focusing on capital protection.

What are the key concerns for the Indian and global equity markets as they approach 2025?

For global markets, the biggest risk lies in a spike in US bond yields. At this stage of the economic cycle, with the economy already close to full employment, tax cuts would be inappropriate as they would lead to overheating. The bond markets showed signs of nervousness in October and early November. These concerns could resurface if US fiscal policy is not disciplined.