ETMarkets PMS Talk: India’s growth + global devaluation = next bull market - Qode’s FY26 outlook

India’s structural growth story combined with the looming threat of global currency devaluation could be the perfect recipe for the next big bull run in equities, says Rishabh Nahar, Partner and Fund Manager at Qode Advisors, in this edition of ETMarkets PMS Talk.

In an exclusive interaction, Nahar shares how Qode’s quant-driven strategies helped their Tactical and All Weather Funds outperform the BSE 500 TRI in April.

With a strong emphasis on risk management, data-backed decision-making, and selective risk-taking, Qode’s approach focuses on consistent outperformance, particularly during volatile or bearish phases.

From managing downside through gold and puts, to identifying high-conviction growth stocks, Nahar explains why volatility isn’t risk—and why India is uniquely positioned for long-term equity market gains as global macro headwinds continue to shift. Edited Excerpts –

Q) Thanks for taking the time out. Qode’s Tactical Fund and All Weather Fund outperformed the BSE 500 TRI in April — what were the key drivers of this strong performance?

A) We specialise in risk management, and that played out well for us. We protect the portfolios with an element of gold as well as protection using puts. We were rewarded because of having these positions and exposure.

The Qode All weather and Tactical portfolios are pure quant portfolios designed to outperform during bear markets. We have a strong risk management framework in place. Since last year, markets (especially mid- and small-caps) have been elevated, and we were in a risk-off mode.

Only in the last few months have we taken some risk on these portfolios. All these decisions are not made subjectively. We have a pure data-driven approach and have done extensive testing with a deep understanding of markets.

Q) What changes or tactical adjustments were made during April that contributed to portfolio resilience?
A) Our portfolios are designed to weather bad months or large amounts of volatility. The Qode All Weather, as the name suggests, is designed to see lower drawdowns and outperform during bad times.

We did not make any tactical changes, since we are a quant fund our models are designed taking years of data that have seen situations like this in the past.

Q) With relatively low beta across the board, how does Qode manage downside risk while still seeking meaningful returns?
A) With all weather and tactical, we try to maintain a low beta, but when markets are beaten down and businesses are available at attractive valuations, we are willing to take on risk. We are not afraid to take risk- when the situation is favourable. Our outperformance will come by protecting downside in bad years. To explain this, here is a simple example:

Agencies

The above table easily shows how drawdowns could affect your returns.

Q) Qode Growth and Future Horizons have slightly higher standard deviations — is this due to increased sectoral concentration or style tilt?
A) With Qode Growth Fund and Qode Future Horizons, we are looking at buying businesses that are showing strong earnings momentum. In the Growth Fund, we hold a 30-stock portfolio with an average market cap of 8000 crores.

These are fairly strong businesses that have shown great execution capabilities in the past. But due to the size of the businesses being smaller, the stock price sees more volatility.

With Future Horizon, we are looking to hold 10-12 fundamentally strong businesses with immense growth potential. This is a more concentrated portfolio because we have a lot of conviction in our picks.

We understand the business in depth and take a large position in each of them. Because of the larger position sizes, the volatility is higher, but we do not consider volatility as risk.

Q) How do you pick stocks?
A) Qode Growth Fund, Qode All Weather and Qode Tactical are pure quant funds. Businesses and ETFs are picked based on factors that we think lead to EPS growth.

There are three pillars we work around: 1. What to buy (fundamentally strong businesses) 2. When to buy (Valuations) and 3. How much to buy (position sizing)

All our quant models are built around this framework. All three strategies are built with a data-driven approach.

Our fourth strategy, Qode Future Horizon – we are looking at a quantamental framework because there are lots of great businesses with scattered data or data that’s not structured.

We look to meet the management and understand the business by taking a deep dive individually in each business.

Q) The April edition highlights ‘Steady in the storm, stronger in the sunrise’ — how does this reflect your macro view heading into FY26?
A) Our macro view remains fixed at the growth story for India and Equity markets. With the US debt crisis coming closer, a large amount of US debt is maturing in the next four years. Money printing and devaluation will be a large factor for equities to do well.

So, money printing/devaluation plus a strong position for India will fuel the next bull market. Having exposure to assets like equities/gold and real estate (mostly land) will be a key component for individuals to maintain/grow their wealth.

Q) What is your outlook for equity markets in Q1 FY26, and how are you positioning your portfolios in response?
A) We refrain from having such a short-term outlook because markets are a complex place, and in the short run, factors like demand/supply, war, and trade policies will have a larger impact on their movement. Even if we could model all these factors there is no significant upside for anyone to have a view on the markets for a quarter or two.

Q) Are there any sectors or themes you are overweight or underweight in currently, and why?
A) We are sector/ theme agnostic. We look for fundamentally strong businesses that have a long runway for earnings growth and promoters that have excellent execution capabilities.

We like to own owner-operated businesses with strong brand names and high ROCE’s. Most of the businesses we own are completely debt-free and have had a strong earnings momentum.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)