Rebalance, keep tech sector exposure limited amid elevated valuations

Investing in US equities has proved rewarding for Indian investors during a period of muted performance by domestic equities.

- SARBAJEET K SEN

While Indian flexicap funds returned 3.6 per cent over the past year, schemes investing in US markets delivered far higher gains. The S&P 500 index and the Nasdaq-100 have returned 18.5 per cent and 27.4 per cent, respectively.

The US remains a robust and well-regulated market. “US equity markets have delivered strong returns over the past year, led by resilient earnings, AI (artificial intelligence)-driven productivity optimism, and a robust economy. While valuations are elevated in some segments, particularly largecap tech, the US remains the world’s most innovative and diversified economy,” says Pratik Oswal, head of passive funds, Motilal Oswal Asset Management Company (AMC).

Strong momentum

US equities may continue to perform well as the US Federal Reserve announced another policy rate cut on October 29. Trade tensions appear to be easing. “Tailwinds such as ongoing AI or productivity gains, consumertech, cutting-edge healthcare solutions and health-tech with resilient domestic demand and rate cut can support equities,” says Abhishek Tiwari, chief executive officer, PGIM India Asset Management.