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8 hours ago
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As geopolitical tensions between the US and China escalate, global investors—particularly Non-Resident Indians (NRIs)—are reassessing their portfolio strategies to navigate the rising uncertainty. From supply chain disruptions and currency volatility to shifting trade dynamics, the ripple effects are being felt across asset classes and geographies. Yogesh Kalwani, Head of Investments at InCred Wealth, believes that this complex environment calls for a recalibrated investment approach. In this insightful conversation, Kalwani outlines how NRIs can reposition their portfolios with a focus on long-short equity strategies, precious metals like gold and silver, and India’s growing appeal as a manufacturing and investment hub. He also shares how diversified asset allocation and tactical shifts can help hedge against global market turbulence. Edited Excerpts –
Q) Thanks for taking the time out. How might escalating trade tensions between major economies like the US and China affect the global investment landscape for NRIs?
A) The impact of escalating trade tensions between the US and China is likely to be multi-dimensional.
Equity Drag: Riskier asset classes, such as equities, could experience heightened uncertainty. Export-oriented sectors such as technology, electronic goods, automobiles and ancillaries, and commodities could be impacted the most.
Currency Devaluation: Countries may resort to currency devaluations to remain competitive. A depreciation of the US dollar could shift investment preferences toward emerging market bonds and equities.
Supply Chain Rejig: Multinational companies could diversify and de-risk their supply chains away from China and toward countries like India, Vietnam, and Indonesia.
Inflationary Rise: Import levies could push up the costs of essential commodities.
Monetary Policy Tweaks: Facing the dilemma of curbing inflation while sustaining economic growth, global central banks may be compelled to adopt varied monetary policies.
Q) In the wake of a tariff war, should NRIs consider reallocating part of their portfolio from global equities to safer fixed-income instruments or gold?
A) Near-term uncertainty could weigh on the performance of global equities, particularly in the US and China. With these two largest markets facing headwinds, NRIs may be compelled to reallocate their portfolios toward more conservative, safer instruments such as high-yielding credit, special situations debt, and developed market-focused long-short strategies that target stable, risk-adjusted returns.
Near-term uncertainty and a weaker greenback could also enhance the ‘safe haven’ appeal of bullion, such as gold and silver.
India, with its low dependence on US exports and a buoyant domestic economy, is emerging as a preferred investment destination for global investors.
Q) What kind of geographical diversification strategies should NRIs adopt to hedge against the volatility caused by trade wars?
A) Given the elevated market volatility and uncertainty, investors may find it difficult to generate returns through long-only strategies. A global equities-focused long-short strategy is better suited to the current environment.
Products that target lower volatility compared to the S&P 500 or FTSE World Indices, managed through shorts and tail hedges to protect against extreme downside, could be an ideal fit.
Gold and silver also serve as efficient portfolio diversifiers and risk hedges during periods of geopolitical uncertainty.
Q) Could India benefit as a manufacturing alternative amid US-China trade tensions, and how can NRIs capitalize on this shift?
A) India finds itself in a sweet spot and has emerged as a viable manufacturing alternative amid the prolonged US-China trade tensions.
The Government of India's continued focus on ‘Make in India,’ PLI schemes, favourable demographics, and global MNCs de-risking their supply chains all work in India's favour.
However, we must move quickly to take advantage of shifts in global supply chains.
In this context, a select few strategically positioned sectors — such as pharmaceuticals, automobiles, electronic goods, textiles, and chemicals — offer pockets of attractive opportunities for asset allocation, and NRIs could capitalise on this shift.
Q) What role do international investment opportunities play in the portfolios of Indian HNIs, and how are wealth managers facilitating access to these markets?
A) Historically, no single geography, asset class, sector, segment, or theme has consistently outperformed across calendar years. Rotation across asset classes, sectors, and segments through different market phases is the norm.
In this context, appropriate portfolio diversification remains the best strategy against uncertainty. Global/Overseas FoFs (Funds of Funds) offer viable investment avenues for achieving sufficient geographical exposure.
For NRIs, global funds provide a range of opportunities to participate in international markets.
Q) How is the increasing wealth in Tier 2 and Tier 3 cities influencing your firm's client acquisition and service strategies?
A) MF AUM from Tier 2-3 cities has grown by 13% CAGR over the past 6 years indicating a shift towards wealth management (WM) products.
MF AUM share from smaller cities has risen from 16% to 18% over the last 5 years. Over half of India's 63 mn registered MSMEs come from Tier 2-3 cities.
To cater to the WM needs of this growing investor pool, we have gradually increased our footprint in Hinterland India by expanding our presence in Tier 2/3 cities.
In absence of a direct foothold, we explore ‘Hub & Spoke’ model to reach out to investors in these cities and add Value to their portfolios by offering a full suite of Wealth products.
Q) Are wealth managers recommending any specific asset classes or geographies as a hedge against trade-related global market turbulence?
A) In an uncertain environment, an investor’s best ally is portfolio diversification. At this point in time, a global equities-focused long-short strategy could serve as an effective risk hedge.
We remain positive on the banking and financial services sector, given its under-owned and undervalued nature. Market-linked debentures (MLDs) that offer principal protection and superior risk-adjusted returns can help reduce risk and are worth exploring.
Investors may also consider high-yield private credit funds and special opportunities-focused debt products, given the limited upside potential in pure equity-focused investments.
Gold and silver are efficient portfolio diversifiers and risk hedges, which could add value to an already well-diversified portfolio.
Q) If someone plans to invest $10,000 in India – what should be the ideal asset allocation strategy for the next 3-5 years?
A) Asset allocation should always be aligned with one’s risk profile and financial goals. For a moderate to balanced risk profile, we favour ‘quality’-biased large-cap funds, select focused and flexi-cap strategies.
Around 70% of the equity portfolio may be allocated to these, with the remaining 30% deployed in mid-cap (20%) and small-cap (10%) mutual funds. Allocations may be staggered over the next 3–6 months.
From a fixed income perspective, we continue to believe that this is an ideal time to lock in current yields for the medium to long term. Investors may also consider building duration in their portfolios through dynamically managed strategies.
Well-curated and selective opportunities in high-yielding/private credit AIFs could also be appropriate during this phase.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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