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From Our CIO’s Desk

The Case for Multi-Asset Diversification in Volatile Times

The ongoing Middle East conflict is a stark reminder that global economies react differently to the same shock. In my recent conversation with Manish Hemnani, we explored why the “old rules” of domestic-only investing must evolve to preserve wealth in this volatile era.

Saurabh Mukherjea

Founder & CIO

The crisis highlights a significant gap in India’s energy security. While the US is a net exporter with 70 years of LNG reserves, India imports 90% of its oil. Consequently, when oil prices soar, the US GDP often benefits while India faces inflation and market corrections. During this recent period of conflict, the Indian markets corrected by ~12% in USD terms—nearly double the hit taken by US markets.

This brings us to the core case for multi-asset diversification.

A common myth, fuelled by mainstream media, is that high risk is the only path to high returns. Nothing could be further from the truth. By equally allocating capital across five asset classes (Gold, Nifty 50, S&P 500, Debt, and Cash), investors achieved ~13% Rupee returns over a 30-year period. While these returns mirror the NSE 500, the volatility in this journey was roughly 1/8th of the index.

Diversification also acts as a shield when countries go through periods of zero returns, as seen in India (1993–2003) and the US (1967–1984).

Finally, as lifestyles become more global, families must plan for currency depreciation. The Rupee historically depreciates by ~40% against the Dollar every decade. If you intend to fund your children’s overseas education, US-denominated assets are a necessity, not an option.

A sound investment strategy always starts with aligning your financial goals and savings before you deploy capital. In my latest podcast, Manish and I shed light on how families should structure their finances to thrive in today’s uncertain world.

Watch the full conversation here: https://youtu.be/aMg2lqg-Hf0

Tej Shah
Portfolio Manager

Multi Asset Portfolio

Rules based portfolio with a basket of different asset classes built on your financial goals providing risk-adjusted returns.

Portfolio Outlook

Expect strategy’s diversified positioning across five major asset classes chiefly, global equities, Cash, REITs/INVITs, Gold along with Indian equities, to help investors navigate through period of heightened uncertainty going ahead.

We continue to look for opportunities to opportunistically rebalance the portfolio through ongoing market volatility.

Allocation to more cyclical Value factor and continued retracement of Gold from all time high levels primarily drove strategy’s relative underperformance in March. Allocation to cash through arbitrage funds and global equities relatively outperformed.

Performance of the scheme (Figures in %)

Omkar Sawant
Portfolio Manager

MeritorQ Portfolio

Rules based Multicap strategy investing in relatively undervalued quality companies.

Portfolio Outlook

Portfolio remains positioned to weather uncertainty and benefit from possible earnings upgrades, with defensive allocation to large caps and REITs balanced by meaningful allocation in good quality small and midcap companies.

Relative to the benchmark, the strategy’s defensive positioning in REITs and quality stocks, while being underweight PSU banks and cyclical sectors like metals, helped in March.

Performance of the scheme (Figures in %)

Arindam Mandal
Head of Global Equities at Marcellus LLC

Global Compounders Portfolio

A gateway to investing in some of the best global companies from the Developed World.

Portfolio Outlook

March was one of the most challenging months for the GCP Portfolio since inception, both in absolute and relative terms.

The broadening seen in February reversed sharply as geopolitical tensions (Iran–Israel–US) led to a risk-off environment, with leadership narrowing back to US large-cap growth and energy.

This shift impacted our positioning disproportionately. The portfolio’s higher exposure to Europe and aerospace was a drag, with MSCI Europe correcting ~10% from peak versus ~9% for the S&P 500. Within holdings, GE Aerospace declined ~17% and Safran ~20%, reflecting concerns around airspace disruptions.

Such events are rare, our overweight in aerospace remains driven by medium-term fundamentals around aftermarket piece.

During the month, we also initiated exposure to defence and commodities, both of which were under evaluation for some time. Our base case remains that oil prices normalize and the broader economy avoids a meaningful slowdown, allowing the cyclical recovery to continue, though sustained high oil remains the key risk. Encouragingly, markets have begun to look past the immediate developments, and the portfolio has recovered part of the lost relative performance month to date.

What worked: Defensive exposures such as Republic Services and Berkshire held up relatively well and provided stability during the drawdown.

What did not: European exposure and aerospace were the primary detractors, with names such as GE Aerospace and Safran seeing sharp corrections alongside the broader weakness in MSCI Europe.

Performance of the scheme (Figures in %)

Rakshit Ranjan
Founder & Portfolio Manager

Consistent Compounders Portfolio

Concentrated portfolio of heavily moated companies that can drive healthy earnings growth.

Portfolio Outlook

In an uncertain macroeconomic environment shaped by AI disruption and shifting global geopolitics, the Consistent Compounders Portfolio (CCP) strategy has evolved significantly.

While maintaining a concentrated portfolio focused on quality businesses, we have diversified our top holdings across uncorrelated sectors such as healthcare, auto components, and export-led manufacturing.

This deliberate shift away from our historical reliance on large-cap consumption, financials and IT services helps mitigate AI related risks to jobs and the domestic growth slowdown. Furthermore, allocations have been increased towards companies with higher expected growth, valuation re-rating potential and recent upgrades to consensus expectations. CCP remains a concentrated strategy with over 40% of the portfolio allocated to the top-5 positions. Total number of stocks currently in the portfolio is 19. Stock selection is still done basis the quality of the underlying businesses. Expected earnings growth over the next 3-5 years across all portfolio constituents is mid-teens or higher. In terms of forward valuation multiples, across more than half of the allocations, expected valuation changes are targeted to contribute positively towards portfolio performance. So far in Q1/Q2/Q3 FY26, the portfolio constituents delivered weighted average EPS growth of 10%/14%/17% YoY respectively.

Over the last 12 months, while Eicher, Astral, and Divis have been the biggest contributors to portfolio performance, CMS, Info Edge and Trent have been the biggest detractors.

Performance of the scheme (Figures in %)

Tej Shah
Portfolio Manager

Marcellus Curation Portfolio

Flexi-cap portfolio focused on investing in quality, well-managed Indian companies positioned to deliver healthy long-term growth.

Portfolio Outlook

In CY2025, MSCI India underperformed the MSCI Emerging Market Index by 31%, its steepest lag in over thirty years.

This was driven by slowing corporate earnings and high valuations following the 2023-24 rally.

Additionally, five consecutive years of FPI outflows led to a capital account deficit—the first since 2013—causing the Rupee to depreciate 5% against the USD and 19% against the Euro.

The BSE500 Index has now seen a 20-month time correction with zero returns since July 2024. While investors shifted to the safety of large-cap “value” stocks—led by a 53% surge in State Owned Banks—mid and small-caps faced significant pain, with median drawdowns of 33% over the past year. Our Portfolio lagged the index during this value rally. While we remain focused on long-term cash flow predictability, we recognize that the drivers of that predictability in India have evolved significantly in the post-pandemic era.

In general, our exposure to healthcare and financials have worked well over the past year while our exposure to industrials have proven to be a drag. The top-5 performers in the last one year were Eicher, Cholamandalam Inv., Narayana Hrudayalaya, HDFC Bank and Bajaj Finserv; top 5 detractors in the same period were Trent, L&T Tech Services, CMS Info Systems, Clean Science and Samhi Hotels.

Performance of the scheme (Figures in %)

Tej Shah
Portfolio Manager

Keshav Binani
Co-Portfolio Manager

Kings of Capital

Our financial sector focused investment strategy with a portfolio of banks, NBFCs, life and general insurers, asset managers and brokers.

Portfolio Outlook

March was a challenging month, with KCP NAV declining 11.8%, versus declines of 11.3% in the Nifty 50 and 16.9% in the Nifty Bank. The PSU Bank index corrected sharply by 19.8%, reflecting concerns around potential treasury losses amid a ~30 bps increase in 10-year bond yields. Encouragingly, pre-result updates from portfolio companies indicate continued momentum in loan growth across banks.

The MFI segment is also seeing AQ improvement, while vehicle and gold financiers are expected to deliver robust loan growth.

Historically, sharp market corrections have created attractive entry points in capital market-linked businesses as valuations reset. We have selectively added to such names. Within this space, volatility-linked plays such as exchanges continue to demonstrate resilience.

While valuations across several stocks now offer improved margin of safety, incremental allocations have focused on businesses where price corrections have been sharp and confidence on FY27 earnings growth remains high. KCP currently trades at ~17x 1-yr forward earnings, near the lower end of its historical range. Key risks include a prolonged geopolitical conflict and elevated crude prices, which could create upside risks to inflation.

Over the last 12 months, top detractors in KCP were CMS Info Systems and Motilal Oswal. The top contributors to the portfolio over the last 12 months have been City Union Bank and MAS Financial Services.

Performance of the scheme (Figures in %)

Ashvin Shetty
Portfolio Manager

Little Champs & Rising Giants

SMID-cap strategies that invests in companies with good corporate governance, capital allocation and competitive advantages.

Portfolio Outlook

Geopolitical issues continue to weigh down on the near-term earnings outlook for Indian corporate earnings in general and LCP and RGP portfolio stocks in particular.

We persist with the view that our portfolios are relatively better placed with recovery in earnings (3QFY26 average earnings growth of 14%), strong balance sheet, reasonable valuations, a diversified domestic/exports/sectoral mix and the past track record during periods of stress. We continue to deploy cash in portfolio stocks that have seen steep price corrections but where likelihood of fundamentals recovering sharply over the medium term appears strong. The drawdowns have also led to some of the coverage stocks coming within our target entry price and we have added few names to the portfolio over the last one month.

Basis the last 3 months attribution ending on March 31, 2026– the biggest detractors have been IT stocks ( R Systems, L&T Technology Services) owning to concerns around impact of AI on their business models and Ahluwalia Contracts. On the other hand, highest contributors to the portfolios have been Acutaas Chemicals (strong beat in 3QFY26 results), Natco Pharma (a relatively new addition in the portfolios) and Stylam Industries (open offer by Aica Kogyo providing support to the share price).

Performance of the scheme (Figures in %)

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