Recent fluctuations in the Indian stock market are nothing new; similar trends were observed in 2013, 2020, and early 2022. According to Nikhil Rungta, co-CIO of equity at LIC Mutual Fund, these corrections provide a valuable opportunity for long-term wealth accumulation. Rungta believes that the Nifty’s decline of 9% and the more than 15% drop in the Nifty SmallCap 100 index represent a healthy adjustment phase for investors.

Understanding Market Corrections

Market corrections often raise concerns, especially with recent headlines surrounding global events. However, Rungta emphasizes that the underlying fundamentals of India’s economy position it well for recovery. He notes that:

• Exports account for less than 20% of the country’s GDP.
• Many companies in export-driven industries have diversified their markets.

For instance, in sectors like pharmaceuticals and IT, while the U.S. remains a significant market, domestic demand and exposure across Europe and the Middle East provide a buffer against potential downturns. Key positives for the Indian market include:

• The RBI’s shift towards a more dovish stance.
• Robust GST collections.
• Stable FY25 Nifty EPS estimates around Rs. 1,100, indicating 13–14% earnings growth.

Navigating Market Volatility

In the face of current market volatility, Rungta and his team are taking a strategic approach to seize opportunities. He explains that:

• They are focusing on building a portfolio geared for future performance.
• In their small-cap fund, they are targeting companies projected to achieve earnings growth of 18–20% CAGR over the next two years, many of which are trading at 15–17x forward earnings.

Sectors like capital goods, industrials, and select manufacturing firms have experienced corrections of 20–25%, yet they continue to perform well. Rungta notes that many quality small-cap stocks are down 25–30%, presenting attractive buying opportunities at valuations below 18x FY26 earnings.

Cash Management Strategy

In light of the uncertainties posed by geopolitical risks and fluctuating global interest rates, Rungta has adjusted the cash levels in certain portfolios by 150–200 basis points. He mentions:

• Cash allocations in some schemes have increased from around 2.5% to nearly 5%.
• This strategy is not a bearish signal but a tactical decision to have liquidity ready for potential sharp corrections.

They have started to redeploy some of this cash into quality companies, particularly in the engineering and chemical sectors, which have experienced price drops exceeding 30% while maintaining strong earnings guidance.

Recent Fund Performance and Strategy

The recent multi-asset NFO has attracted significant interest, raising over Rs. 450 crore. Rungta notes that this reflects a growing preference among investors for dynamic, diversified investment strategies. Currently, allocations are balanced across:

• Fixed income and gold.
• Sector-focused equities in domestic growth areas, such as capital goods and financials.

Additionally, they have included silver ETFs in the portfolio due to its strong demand outlook despite recent underperformance. While SEBI’s guidelines ensure accountability, the current market’s volatility can complicate optimal execution.

Outlook on Gold Investments

Rungta highlights that the LIC MF Gold ETF has delivered an impressive 40% annualized return, attributing this to a surge in global gold prices. This rise is driven by factors such as:

• Increased central bank purchases.
• Lower real yields.
• Rising safe-haven and investment demand.

Although predicting a specific price target for gold is challenging, Rungta asserts that gold remains an essential component of investment portfolios, especially in an environment filled with global uncertainties.

In conclusion, while the Indian stock market faces short-term challenges, the strategic insights from experts like Rungta suggest that there are substantial opportunities for long-term investors willing to navigate the current landscape wisely.