Devina Mehra on gold, silver, China and the risk landscape

Assets traditionally seen as safe havens, such as gold and silver, have moved centre stage, with investors flocking to them amid rising global uncertainty.

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Volatile equity markets have left many questioning how their asset allocation should be structured in the current environment. To make sense of the shifting landscape, Mint spoke to Devina Mehra, founder, chairperson and managing director of First Global, on her views across asset classes. Edited excerpts:

Market sentiments appear cautious at the moment. How do you read this environment?

What stands out to me is that an increasing number of commentators are openly discussing market risks. That’s quite different from the usual narrative centred on the India growth story.

Historically, when sentiment turns broadly pessimistic, it often acts as a contrarian indicator. From that perspective, I would actually read this mood as a positive sign. But markets are not predictable, especially in the short run.

What do you see as the key drivers for the Indian markets going ahead?

I do expect corporate earnings to start improving from the December-ending quarter onwards. On valuations, contrary to popular belief, they are not out of line with historical trends if you analyse them industry by industry.

Looking at the index-level valuations can be misleading because index compositions change significantly over time. Interest rates have also been declining, which is a positive for the equity markets.

Are there any key areas of concern you are tracking closely?

One area of concern is the fiscal side. Tax collections are running well short of budget estimates, partly because nominal GDP growth has been weaker than anticipated. This raises questions about the government's fiscal headroom, especially given ongoing discussions around capital expenditure and support measures.