US President Donald Trump’s tariff threats caused significant damages, but the worst is behind us, believes Aashish Somaiyaa, CEO of WhiteOak Capital AMC. He tells Ananya Grover that uncertainty is a part and parcel of markets, and advises investors to stagger investments. Excerpts:
How did you assess the whole Trump tariff situation? Has it settled or do you expect more actions?
The worst is behind us. The US GDP is in the negative in the first quarter of CY2025. The imposition of a 10% tariff is still understandable and buyers may be willing to pay that much higher. However, if tariffs become obscenely high at 35%, 50% and 125%, neither buyers or sellers will find it attractive to do business. There has already been a halt in goods movement between China and the US. Since there are the world’s two biggest economies, global economic growth would also slow down. But incrementally, you can say the worst is behind us because now people are on the negotiating table and saying nice things to each other.
The market is almost back to peak levels after recent corrections. Do you think valuations are justified?
There has not been a single year when the market did not fall 15-20% on an average from its peak. On the other hand, in 25 years, there were only three or four years where the index for the full year went negative. Corrections are a feature, not a fault. The idea is to expect uncertainty. Valuations are now fair. Till two months back, they were cheap, but they are better than one year back. Domestic growth conditions are also better. I think the growth is likely to revive. I always anticipated that if the US economy were to slow down, it would be accompanied by a decline in the dollar and falling yields. That is good for our policy as it is strengthening the RBI’s case for cutting rates and pumping liquidity into the system and improving credit flow.
Is it the right time to enter the market?
You should stagger the investment. Many things have improved, but the geopolitics is still on a boil. You will notice that neither India nor Pakistan did use the word ceasefire – it is more like a pause to the hostilities and the Indus Water Treaty is still in abeyance, and we are still in a confrontational posture. Those headlines will keep flowing and that will cause a flutter once in a while.
What has your approach been to the multi-asset fund in current times? Has the allocation towards equity reduced?
At a model level, we first determine how much money should be allocated to equity and non-equity. Within equity, we also determine how much should be domestic and whether we should utilise any international exposure. Then, we assess the allocation between equity and gold. Finally, the residual amount is allocated to fixed income. Between September and now, the stock market declined significantly, and yields also dropped. As a result, the equity exposure increased from 24% to 33%. Gold exposure also increased — from 23% to 30% — primarily because prices rose significantly and much of the dollar’s decline has already occurred.
As of now, we are at approximately 13–13.5% in gold and 31% in equity. People who are open-minded and probabilistic in their thinking are better positioned to practise asset allocation. It involves studying correlations, relative movements and valuations, and then allocating funds across asset classes — and finally, allowing those asset classes to find their own levels in an unfettered manner.
What is your view on NFO launches and Sebi’s rule for money deployment? Are you planning to launch anything soon?
In 2024, when the market was red hot, everybody was launching NFOs in PSU, defence, energy, infrastructure and manufacturing, following 3-5 years of fabulous performance of these sectors. We launched everything which was contra like banking, pharma and digital. In the last one year, the equity index return was in low single digit, but the net asset value (NAV) for all the NFOs we did are up 20%. However, but for many in the industry, the NAV is negative. If we raise money in NFO, it gets deployed within 5-7 days. We are going to be compared with the benchmark and there is no cash in it. Don’t launch a fund if you are not convinced. Currently, we have nothing in the pipeline.