Investors Would Do Well Betting on Large Caps in VUCA Environment

We expect to see continued easing of rates by the RBI at its April meeting on the back of benign inflation... Niraj Kumar CIO, Future Generali India Life Insurance

- Ram Sahgal

The recent recovery suggests that markets may have found some floor even as risks from global uncertainties and tariff war persist, but investors would do better to stick to large caps amid volatility, according to Niraj Kumar, chief investment officer at Future Generali India Life Insurance.

"The prevalent VUCA (volatility, uncertainty, complexity, ambiguity) environment will continue to pose bouts of volatility," said Kumar.

Still, Kumar believes US President Donald Trump's reciprocal tariffs won't have a lasting impact on Indian trade and markets. He remains "constructive on the markets" in the medium term.

Excerpts from the interview:

March lows. Do you think we have bottomed out? Prima facie, the recent recovery in markets from the 4 March low (21,964.60) suggests that markets may have found some floor, as it seems to be cognizant of the broader economy having bottomed out. The recovery has been supported by strong domestic liquidity, interest rate cut, contained inflation, a pick-up in government capex, liquidity injection by RBI (Reserve Bank of India), arrest in FPI (foreign portfolio investor) outflows and robust retail participation.

You expect FPI outflows to reverse?

Global uncertainties such as tariff wars, US Fed policy and geopolitical risks will continue to pose bouts of volatility. A few global factors such as the reduction in QT (quantitative tightening) announced by the Fed, lower crude oil prices and the softening of the dollar index as well as global market volatility are to some extent supportive for FPI flows to return into Indian markets.