Buy into corrections gradually to become overweight on equities as markets turn cheap, says Nilesh Shah of Kotak Mutual Fund

As global markets grapple with rising uncertainty stemming from President Trump’s imposition of tariffs on multiple countries, Nilesh Shah of Kotak Mutual Fund advises investors to buy into market corrections gradually to become overweight on equities as valuations turn attractive.

“It will be futile to predict future events. Hence, I advise investors to follow their asset allocation dharma. Since large caps are fairly valued, they deserve a neutral allocation,” he adds.

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Commenting on the heightened market volatility, Shah said, “The market is unable to quantify the uncertainty unleashed by the tariff war. It is reacting to every piece of news that comes through.”

“It is likely that the unfolding events will keep sellers in aggressive sell mode and buyers in reluctant buy mode,” he added.

From a long-term perspective, Shah finds domestic themes such as cement, building materials, and consumer discretionary sectors attractive.

He also sees positive tailwinds for India’s consumption story. According to Shah, the recent tax rebate announced in the budget, a potential reduction in EMI burden due to falling interest rates, a likely drop in oil prices, and the implementation of the Eighth Pay Commission next year could all boost household spending.

Shah also remarked that, “President Trump is proving what Sant Tulsidas wrote centuries ago: Samrath ko nahi dosh gosain (The powerful can’t be faulted or blamed).”
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He emphasized that while India is less affected than some of its global peers, the country must act strategically to turn the situation to its advantage. He suggested that India could potentially attract business in segments like footwear and garments from other Asian countries, provided it moves decisively.

“The world will respond to U.S. tariffs through currency weakening, negotiations under Clause 4 of the order to satisfy U.S. concerns, counter-tariffs, and possibly lobbying within the U.S. to challenge the order in court,” Shah noted.

“India has been hit less than most of its peers. It is up to us how we manage the situation. We can attract footwear and garments businesses from Asian peers if we get our act together,” he added.