Funds ka Funda: Markets, Volatility & Smart Investing in Uncertain Times

Introduction

Vidhi Mehta: Hello everyone and welcome to another episode of Funds ka Funda.

Markets today feel increasingly uncertain. Geopolitical tensions, global macro shifts and sharp sectoral moves are changing narratives almost every few weeks. One moment India looks unstoppable, and the next moment concerns around valuations start surfacing.

So, in such an environment, what should a retail investor actually do?

To help us understand this better, we have with us Ankit Jain, Senior Fund Manager at Mirae Asset AMC, with over a decade of experience in managing funds.

Hi Ankit, welcome to the show.

Navigating Market Reactions to Global Events

Vidhi Mehta: Over the past few weeks, markets have reacted sharply to geopolitical developments. Even when such events fade, markets don’t always recover immediately.

In such situations, should investors stay patient and continue for the long term, or should they actively make changes to their portfolio?

Ankit Jain: These kinds of events are difficult to fully incorporate into a structured investment framework because they are often unpredictable.

The key question is whether such events are temporary or long-lasting. If the impact is short-term, then some of the effects on companies and markets may also be transient. But if the situation prolongs, it can lead to broader earnings resets.

Take crude oil, for example. India imports a large portion of its oil, so sustained high prices can impact the economy significantly. In such cases, investors need to evaluate whether the impact is short-term noise or something structural.

At this point, our view is that some of these disruptions may be temporary and could normalise over time.

Should Fund Managers Make Big Portfolio Changes?

Vidhi Mehta: Historically, markets have shown resilience even after major global events. In many cases, indices have delivered positive returns within a year.

So as a fund manager, do you make meaningful changes in such phases, or do you largely stick to your strategy?

Ankit Jain: The extent of change depends on how long the disruption is expected to last.

From a broader perspective, the medium-term outlook for crude and global demand-supply dynamics remains relatively stable. There may be short-term spikes, but structurally things are more balanced.

So, while there may be tactical adjustments in the near term, we generally do not make drastic shifts in portfolio construction.

Markets can be sentiment-driven in the short term, but over the medium term, fundamentals tend to play out. And from that standpoint, India continues to remain strong, supported by improving earnings.

Domestic Flows vs Foreign Investors

Vidhi Mehta: For years, foreign investors dominated the markets. But recently, domestic investors especially through SIPs have played a major role in absorbing volatility.

Do you think domestic flows are now strong enough to offset FII outflows?

Ankit Jain: If you look at the data over the past few years, cumulative foreign inflows have actually been close to zero because outflows have been significant at times. On the other hand, domestic institutional investors have invested massively supported by consistent SIP flows.

Today, domestic ownership in Indian markets has increased significantly and, in some cases, even exceeded foreign ownership.

This is a positive structural shift because these flows are relatively sticky and predictable, which helps reduce volatility.

However, markets can still remain volatile due to global events and sentiment shifts, which are difficult to forecast.

Are Markets Expensive Today?

Vidhi Mehta: There is a common concern that certain sectors like defence, railways, capital goods are expensive.

How do you differentiate between valuations that are justified and those that may be vulnerable?

Ankit Jain: At a broader level, we do not believe the overall market is extremely expensive.

Over the past 18 months, markets have seen consolidation, some corrections in pockets, and earnings growth has continued. So valuations, in general, are reasonable.

However, in certain sectors, valuations are pricing in very strong future growth for a long period.

While near-term factors like sentiment or order books may support these sectors, sustaining such high growth over long periods can be challenging.

Our approach remains consistent  we focus on growth at a reasonable price, separating near-term momentum from sustainable long-term earnings growth.

Investment Philosophy: What Really Matters

Vidhi Mehta: Let’s talk about the funds you manage. What is the core philosophy behind your investment approach?

Ankit Jain: Our philosophy is built on three key pillars:

1. Business Quality – We look for companies with strong growth potential and a large addressable market.
2. Management – Strong leadership and governance are critical.
3. Valuations – Even a great business is not a good investment if you overpay. 

The goal is to build a diversified portfolio that can withstand mistakes and external volatility while delivering consistent returns over time.

Midcaps & Small Caps: Opportunity or Risk?

Vidhi Mehta: Midcaps and small caps tend to deliver higher returns but also come with sharper drawdowns.

How should investors think about them today?

Ankit Jain: Over the last few years, the midcap and small cap universe has evolved significantly.

Many companies have grown in size, improved their balance sheets, and become more resilient. Historically, these segments have delivered higher earnings growth compared to large caps, which reflects in higher returns over time.

Yes, they can see sharper drawdowns during uncertain periods, but they also tend to recover faster.

In fact, the current environment with uncertainty and corrections — is creating opportunities in this space for long-term investors.

How Much Allocation Should Investors Have?

Vidhi Mehta: For a retail investor, how much exposure to mid and small caps makes sense?

Ankit Jain: It depends on the investor’s risk profile and life stage.

But for a typical investor in their 30s, a balanced allocation could look like:

• 45–50% in large caps
• 50–55% in mid and small caps 

This allows participation in growth while maintaining stability.

Closing Thoughts

Vidhi Mehta: Thank you, Ankit, for sharing your insights.

The key takeaway from today’s conversation is that while markets may feel uncertain, the right approach is not panic, but perspective.

Understanding the difference between short-term noise and long-term fundamentals, staying disciplined, and maintaining the right asset allocation can make all the difference.

Before we close, here’s a question for you 
What mindset do you think investors should maintain in today’s market conditions?

Let us know in the comments.

Disclaimer: Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.