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Dynamic Equity Strategy Gains as Trade Deals Boost Earnings Visibility

A report from PL Asset Management recommends a dynamic, rule-based allocation strategy across equities and gold as the Indian market transitions from correction to opportunity. Improved earnings visibility stems from recent trade deals, policy continuity in the Union Budget 2026, and stabilizing macro fundamentals. Valuations have moderated toward historical averages, improving the medium-term risk-reward profile for equities. The firm observes early signs of recovery, including sector rotation and the outperformance of the 'value' factor.

Key Points: Dynamic Equity Allocation Advised as Market Opportunities Emerge

  • Valuations normalizing toward long-term average
  • Domestic liquidity remains robust
  • Trade deals and budget improve earnings visibility
  • Rotation toward cyclical sectors signals improving risk appetite
  • Dynamic strategy uses macro signals and volatility regimes
2 min read

Maintain dynamic equity allocation as trade deals improve earnings visibility: Report

Report recommends dynamic multi-asset strategy with gold hedge as valuations normalize and trade deals improve earnings visibility for Indian equities.

"With Budget clarity and strengthening trade linkages enhancing earnings visibility, we remain constructively positioned for the next phase of recovery. - Siddharth Vora"

Mumbai, Feb 19

Due to macro stability and recent trade deals, the earnings visibility of Indian markets improved, opening new opportunities after a phase of correction, a report said on Thursday.

The report from PL Asset Management, the asset management arm of PL Capital Group, recommended a Dynamic allocation strategy with gold hedge to investors. It is a "rule‑based multi‑asset allocation framework that dynamically calibrates exposure across equities and gold based on macro signals, valuation metrics and volatility regimes," the report said.

"With valuations normalising, domestic liquidity staying robust and internal risk indicators stabilising, the market is transitioning from a phase of correction to one of emerging opportunity," the firm forecasted.

Indian equities entered a consolidation phase in January 2026 amid global de‑risking, currency pressures and commodity volatility, and equity valuations have moderated toward a long‑term average range of approximately 19-20x earnings, the report noted. The report said that the moderation in valuations have improved the medium-term risk-reward profile of equities.

While the correction exposed narrow market participation, leading quantitative indicators suggest markets may be transitioning from consolidation toward early recovery, the firm suggested.

"With Budget clarity and strengthening trade linkages enhancing earnings visibility, we remain constructively positioned for the next phase of recovery," said Siddharth Vora, Head - Quant Investment Strategies & Fund Manager, PL Asset Management.

According to the firm, Union Budget 2026 maintained policy continuity with a balanced focus on fiscal prudence and growth, sustaining capex, infrastructure, and manufacturing reforms that improve earnings visibility across industrial and export-led sectors. With inflation contained and external balances stable, macro fundamentals remain anchored.

The asset management firm said that the 'value' factor had outperformed in recent months, suggesting investors are gradually repositioning portfolios ahead of broader participation. Further, equities are trading near multi-cycle relative lows versus gold, reinforcing the case for improving forward return probabilities as volatility stabilizes, it said.

The firm signalled a rotation toward higher beta and cyclical sectors - historically an early marker of improving risk appetite.

- IANS

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Reader Comments

P
Priya S
Finally some clarity after the January jitters! The focus on policy continuity in the budget is reassuring for long-term investors like me. Hoping the rotation to cyclical sectors brings good opportunities. 🤞
R
Rohit P
Dynamic allocation sounds smart, but these "rule-based frameworks" from fund houses are often too complex for the common investor. They should explain in simpler terms how a regular person can benefit from this transition phase.
S
Sarah B
Interesting read. The comparison to gold is particularly insightful. With global volatility, having that hedge seems prudent. Hope the early recovery signals hold true.
V
Vikram M
Macro stability is key. The report rightly highlights contained inflation and stable external balances. This foundation, combined with better trade linkages, should support the market. Time to review my SIP allocations.
K
Karthik V
Value factor outperforming is a classic sign of a maturing correction. Good for investors who held their nerve. The focus on manufacturing and exports in the budget is a big plus for earnings visibility. Bharat's growth story continues! 💪

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