Chakravarthy V., co-founder and executive director of Prime Wealth Finserv, says it’s a time when understanding the source of volatility is more important than trying to chase the best performer of the moment. In an interview with Mint, Chakravarthy highlighted heightened volatility in gold and equities and emphasised that while markets are volatile, the economic foundation for long-term wealth creation hasn’t cracked. Edited excerpts:
It’s a time when equities, gold, and silver are all volatile. Is it a challenging time for wealth creation?
It feels challenging right now because all major asset classes are moving more aggressively than usual.
These aren’t normal market moves; they’re reactions to uncertainty. But the underlying Indian economy isn’t showing the same instability.
Growth expectations for the year are still above 7%, and inflation has fallen close to the RBI’s comfort band.
Domestic investors are also adding stability: SIP inflows reached an all-time high of ₹31,000 crore per month.
So, while markets are volatile, the economic foundation for long-term wealth creation hasn’t cracked – it’s just temporarily overshadowed by global events.
What should be our investment strategy across asset classes?
Today, each asset class is reacting to a different trigger. Equities are being pulled down mainly by global risk-off sentiment and oil prices.
Gold is rising because investors are seeking safety, not because of domestic demand.
Bond markets are adjusting to the RBI’s move to phase out its temporary liquidity support after March.
What this tells me is that we’re in a headline-driven market, not a fundamentally-driven one.
For example, gold’s 20% rise in January followed by a sudden 5% drop in early February is not normal price behaviour – it’s stress pricing.
Equities, too, are seeing sharp intraday swings of 300–500 points on the Nifty, which typically occur only during periods of global uncertainty.
So, any strategy today needs to start with acknowledging these very different behaviours across assets.
This is not a time when one asset class clearly leads; it’s a time when understanding the source of volatility matters more than chasing the best performer of the moment.
In the equities basket, do you think small-caps are ripe for a rebound?
Small-caps have definitely cooled after a long stretch of outperformance. The correction has brought valuations closer to their historical averages.
The index currently trades around a P/E of nearly 26, compared to its seven-year median of about 30, which means the earlier froth has reduced.
But that doesn’t automatically mean a broad rebound is around the corner. Small-caps are extremely uneven right now.
Some companies in manufacturing, industrial components, and niche exports continue to grow profits at 15–20%, while others that rallied purely on liquidity have seen earnings barely grow.
If a rebound happens, I expect it to be selective. Historically, small-caps recover strongly only when earnings visibility improves and when volatility reduces – and we’re not fully there yet.
The space looks healthier now, but not uniformly attractive.
Is it time to do bottom fishing in the IT pack? What is the outlook for the sector?
The IT sector’s fall has been unusually sharp. The Nifty IT index dropped about 21% in February, making it one of its worst monthly performances in over two decades.
This isn’t only because clients are cutting discretionary spending; it’s also because the market is worried about AI reducing demand for traditional IT services.
At the same time, the correction has pushed valuations back to more normal levels. Many large IT companies that were trading at 25–28 times earnings last year are now closer to 20–22 times, reflecting more reasonable expectations.
But the sector isn’t out of the woods yet. Deal pipelines are still slow, attrition has come down only because hiring has cooled, and several companies have guided for softer revenue in the near term.
I see the next phase for IT as a reset period: not a collapse, but a slower, more measured cycle where the companies that genuinely adapt to AI and automation may separate themselves from the rest.
How do you expect the domestic market to perform in FY27? What are the key triggers that will be on your radar?
I expect the market to move forward, but with noticeable bumps along the way. India’s economic backdrop is still strong – GDP growth projected at 7%+, inflation cooling towards 3%, and profit growth for the Nifty expected in the 11–13% range for FY26–27.
These are solid fundamentals. But several triggers could shape the year. The biggest is crude oil. If the Iran situation keeps oil above $90–100 per barrel, it affects India’s currency, inflation, and sentiment almost immediately.
Another key trigger is liquidity. The RBI is scaling back its additional liquidity support after March, which could push short-term rates slightly higher.
Foreign flows will also play a big role. Their flows remain unstable and could swing with any global shock.
So overall, it looks like a year with constructive fundamentals but uneven monthly movements.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
