Deepak Shenoy, CEO of Capitalmind Mutual Fund, doesn’t appear worried about current market volatility. “This feels strange, but it is actually business as usual for the markets,” said Shenoy in an exclusive interview with Mint. Shenoy believes the domestic market is still recovering from a 2025 downturn driven by factors such as the India-Pakistan war, new tariffs, and slowing earnings. He sees signs of recovery in earnings. In his chat with Mint, Shenoy shared his insights on the markets and whether it is the right time to increase exposure to equities. Edited excerpts:
The market has been swinging significantly. Why is it unable to sustain its gains right now?
It is important to keep perspective; a 900-point move is only about 1% of an 84,000-point index. We have been used to very low volatility over the last five years, so this feels strange, but it is actually “business as usual” for the . There hasn’t been meaningful upward momentum because we haven’t broken through previous highs. We are still recovering from a downturn in 2025, driven by factors such as the , new tariffs, and slowing earnings.
What is driving the current sense of uncertainty?
Geopolitical uncertainties have returned, and there is significant “spooking” regarding (AI). New technology often looks like it will destroy the old, but historically, tech shifts create new opportunities rather than total destruction. Additionally, whileis in recovery mode with cuts and returning consumption, earnings growth has been slower than real growth, leading to muted market gains.
What is your assessment of the Q3 earnings? Were they in line with expectations?
We are finally seeing signs of recovery. Median large-cap growth is around 14% year-on-year, while mid- and small-cap earnings growth is about 18%. These numbers are actually better than they look because they include one-time hits from new labour laws that impacted growth by roughly 3% to 5%.
Are Indian market valuations fair after the recent corrections?
Compared with the long-term history, we are still significantly above the median and could be considered overvalued. However, the index today is composed of different companies with much longer growth runways than those 15 years ago. If that growth pans out, we aren’t overvalued; if it doesn’t, we are. There are also massive valuation disparities at the sector level—cement and steel are trading at very high multiples, while IT and private banks are relatively cheap.
What should the equity strategy be for the mid- and small-cap segments, given the high India VIX?
The rise in the VIX isn’t necessarily due to fear; it is partly a function of changes in the budget and reduced liquidity in the options market. For the near future, the market might trend sideways or downward, with a potential recovery likely in the latter part of 2026.
Is it the right time to increase exposure to equities?
The choice ultimately depends on the investor’s risk profile. If you are unsure about the right time to increase exposure or don’t want to constantly decide how much to allocate to equity, debt, or commodities, a multi-asset fund can be a good option. In such funds, professional managers make allocation decisions based on quantitatively tested models.
One key advantage is tax efficiency. When the fund shifts between asset classes—say from 40% equity and 30% commodities to 60% equity with lower commodity exposure—there is no tax impact on the investor. The reallocation happens within the fund, and the investor does not need to take any action.
So, if you are confused about asset allocation or prefer not to actively manage it, a multi-asset fund may work well—especially for lump sum investments.
However, if you actively track markets and prefer managing allocations yourself, the main question should be whether your current equity exposure has drifted away from your ideal level. For example, if you are comfortable with 70% equity but market movements or fear reduce your allocation to 50%, you may consider gradually increasing it back to 70% through fresh SIPs. In this case, you manage equity, debt, and commodity exposure separately and rebalance toward your target allocation.
For large lump sums—such as bonuses or IPO gains—it may be wiser not to invest everything at once. Instead, you could park the money in an arbitrage fund and use a Systematic Transfer Plan (STP) to move funds gradually into your chosen investment over one or two years. This approach can be more tax-efficient and disciplined than making allocation decisions impulsively.
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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.