Shreyas Devalkar, Head of Equity at Axis Mutual Fund, which manages nearly $38 billion in funds, noted that while markets are grappling with volatility, the real concern lies in the growing unpredictability surrounding global trade policies.
Devalkar highlighted that sectors exposed to exports—such as IT and auto ancillaries—are at greater risk due to possible retaliatory measures, legal challenges, and the broader slowdown in global demand.
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He pointed out that even businesses themselves are hesitant to make strategic decisions like setting up new plants or shifting supply chains, given the lack of clarity around future policy moves. “…in the near term, it can be indecision simply from a US company not to import today, because today the tariff is higher, while you don’t know 15 days down, the tariff is lower.”
As a result, Axis MF has been gradually reducing exposure to export-linked sectors and increasing allocation to domestic opportunities. Devalkar mentioned financial services, consumption, and infrastructure as areas of focus—sectors that are relatively insulated from global trade shocks and offer better earnings visibility in the current environment.
Valuation discipline is also a key part of the strategy. Devalkar expressed concern that many stocks are still anchored to pre-COVID valuation expectations without factoring in the structural slowdown in global growth. He urged investors to think critically about elevated valuations, especially in sectors that have experienced long-term growth deceleration, like IT.
Devalkar expressed concern about the IT sector’s declining growth rate and the need for a cautious approach. “Historically, we have seen that whenever there is uncertainty, wherever there has been any potential lack of decision making by their US-based client or Europe-based client, this sector, irrespective of its valuation, has faced challenges in terms of its valuation.”
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In a market where sentiment can quickly overtake fundamentals, Axis Mutual Fund is leaning into stability and visibility over short-term gains. “One should look at more towards the domestic-oriented sectors,” Devalkar advised, adding that investors should adopt a two-to-three year view to navigate the current volatility.
For the full interview, watch the accompanying video
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