With the April 2 deadline for U.S. tariff decisions looming, India’s fund managers are reassessing their portfolios amid heightened volatility. While a sharp rebound followed the steepest correction in small- and mid-caps since the pandemic, the rally is losing steam, and nervousness is creeping back into markets. How are PMS managers navigating this period of uncertainty? Conversations with five key players reveal a common theme: prioritising domestic businesses and exporters with competitive advantages that can withstand tariff pressures.
Marcellus Investment: Focusing on quality in a slowdown
Pramod Gubbi, founder of Marcellus Investment, is staying true to a stock-specific approach. “As bottom-up investors, we focus on individual stocks rather than speculating on broader market movements. Our analysis is grounded in stock-specific impacts, especially in the context of India's cyclical slowdown,” says Gubbi.
With FY25 earnings growth projected to remain in the mid-to-high single digits, he notes that valuations, while slightly corrected, remain elevated. Financials remain a core focus. “They’re still reasonable compared to other sectors,” he explains, pointing to names like HDFC Bank, ICICI Bank, and Bajaj Finance.
Gubbi is cautious about the slowdown in government-led capital expenditure, warning that a sharp deceleration in the public Capex cycle after years of strong growth could weigh on sectors reliant on state spending. He also sees signs of a cooling in urban middle-class consumption.
For small- and mid-cap stocks, he believes a necessary correction is yet to materialize. “The market seems to be overlooking the fact that their earnings growth is slowing,” he adds, flagging risks from excessive liquidity and artificial demand from mutual funds.
On IT, he acknowledges near-term headwinds from delayed discretionary spending and concerns over the U.S. economy but remains bullish on fundamentals. “The sector has strong business models and high cash generation. The short-term outlook is clouded by delayed recovery in IT spending from U.S. enterprises.” Marcellus holds select positions in large-cap names like HCL Tech and L&T, along with a few mid-caps, while maintaining an underweight stance overall.
360 ONE Wealth: Playing defense with domestic themes
Umesh Agrawal of 360 ONE Wealth is taking a cautious stance, avoiding aggressive accumulation as corporate earnings remain muted. “There’s no rush to accumulate positions,” he says, favouring sectors with strong domestic demand that can weather global uncertainty.
He’s particularly bullish on healthcare (domestic) and consumer electronics manufacturing—industries relatively insulated from trade disruptions. “I’m focusing on sectors that are rooted in India’s growth story,” he adds. Agrawal is also eyeing opportunities in the circular economy and precision engineering, focusing on stocks with profitability and low debt.
Emkay Investment Managers: Tariff risks overblown?
Kashyap Javeri of Emkay Investment Managers sees tariff concerns as less severe than feared. “The tariffs will likely be implemented, but they’ll be more measured than most anticipate,” he says. He believes auto ancillaries and pharma CDMOs (Contract Development and Manufacturing Organizations) are well-placed to withstand trade pressures.
Pointing to the inelastic nature of supply chains, particularly in auto ancillaries, he argues that high tariffs won’t significantly impact Indian players. “U.S. manufacturing just can’t compete with India,” he notes, highlighting OEM-specific production that limits supplier substitution.
Javeri is selectively adding high-quality mid-cap stocks that have seen sharp corrections. “There are great opportunities in high-quality companies right now,” he adds, advocating patience and strategic accumulation.
Motilal Oswal: Domestic-facing sectors in focus
Prateek Agrawal, MD and CEO of Motilal Oswal, emphasises sectors driven by India’s economic trajectory rather than external forces. “We’ve intentionally avoided export-heavy sectors,” he says, favouring healthcare, airlines, renewables, and defense—industries with strong domestic demand and minimal tariff exposure.
His strategy aligns with the firm’s QGLP (Quality, Growth, Longevity, and Price) philosophy, targeting companies with robust balance sheets, strong fundamentals, and sustainable growth. “We don’t need to make drastic moves. Our portfolio is already focused on quality,” Agrawal states.
Generational Capital: Betting on brand power
Satwik Jain of Generational Capital is leaning on India’s rising consumption story. “In a market like India, where consumption is growing, you can’t go wrong with strong consumer brands,” Jain says. He’s backing companies like V2 Retail, Ethos, and Varun Beverages, which are insulated from tariff risks and poised to benefit from domestic demand.
He’s also tracking opportunities in pharma and tech, particularly firms with niche focus areas. “I’m looking for companies that have built strong foundations and have a clear growth trajectory,” Jain explains, with a preference for domestic pharma brands and Ayurveda-based businesses seeing surging consumer interest.
Prudent Equity: Choosing infrastructure and banking
Aman Soni at Prudent Equity, is prioritising infrastructure and banking stocks as tariff risks loom. In fact, for him the real challenge lies in deploying fresh capital amid tariff ambiguity. “We prefer predictable sectors over those mired in uncertainty,” he said while pointing out that they have consciously avoided IT, autos, and chemicals. This is while maintaing around 30 percent in cash to capitalise on new opportunities.
Diwakar Rana at Prudent Equity highlighted that their portfolio is well-protected from U.S. tariff risks, with less than 1% exposure to the U.S. market. He rather flags potential risks from cheaper Chinese imports flooding India, as China’s manufacturing strength combined with low domestic consumption could disrupt local markets.
Anand Rathi Wealth on what lies ahead
According to Feroze Azeez, CEO of Anand Rathi Wealth Limites, the tariff impact could be temporary given that the Indian government is already taking measures, such as relaxing import duties and also realigning strategic associations to enhance trade relations. "When it comes to investing, these sectors may see high volatility temporarily, but in the long term, corporate earnings and valuations are likely to drive," he said.
He suggested that mid-caps should be less exposed to tariff risks and if US tariffs dampen global export demand (forcing exporters to cut prices), Indian mid-caps relying on imports, could benefit from lower input costs. "... Improved margins and profitability will then create an inverse relationship between large-cap struggles and mid-cap resilience," he reasoned. Azeez believes that large-caps have more impact on tariff-related disruptions, while mid-caps could see a cost advantage—a divergence that could shape market dynamics in the coming quarters.
However, investors are not recommended to make investment decisions based on this, which could be temporary. Azeez suggests for long-term investing, investors are recommended to invest across the market caps with 55:25:20 in large, mid, and small caps.
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