PL Asset turns risk-on, hikes exposure to cyclicals on signs of recovery in equities

Siddharth Vora also said the earnings downgrade cycle may be bottoming out, setting the stage for potential upgrades in the December quarter.

After months of defensive positioning, PL Asset Management has turned decisively risk-on, betting on cyclicals and high-beta stocks as equity market shows early signs of a recovery in risk appetite.

In the latest newsletter, Siddharth Vora, Portfolio Manager at PL Asset Management said indicators such as market breadth and factor rotation are pointing to a change.

“Our sentiment signal is sustaining its strength, suggesting that the worst is behind, while there remains enough upside room for a sustained recovery before we turn cautious again,” Vora said in the September 2025 PMS newsletter.

The shift marks a meaningful pivot in PL’s positioning strategy, with the flagship AQUA PMS raising allocations to financials (32%), materials (24%) and industrials (11%), while trimming exposure to IT and healthcare. Portfolio beta has been increased from below 1 to about 1.2, signalling a deliberate move to align with a risk recovery phase.

This repositioning by PL Asset had paid off in September, as AQUA PMS gained 3.4 percent, outperforming the BSE 500 TRI’s 1.2 percent, on gains in metals, autos and PSU banks.

Since inception in June 2023, the strategy has delivered 22.7 percent returns versus 17.7 percent by its benchmark in the same period.

Vora said value and high-beta factors have started outperforming after a year of defensive leadership, as investors seem to be rotating money back into cyclicals.

“The share of stocks hitting new 12-month highs has doubled from recent lows, while quality and low-volatility styles are now mean-reverting. That reflects improving risk appetite — not euphoria — which is healthy for long-term equity participation,” he added.

The newsletter said valuations are now neutral, having recovered from deep under-valuation levels in March 2025, and India remains relatively well-placed despite global volatility. A supportive domestic setup - including GST 2.0 reforms, stable liquidity, and US Fed easing - is expected to drive a broader earnings recovery through FY26, said the PL newsletter.

From a macro standpoint, the PL Asset remains constructive on the medium-term prospects. The headline inflation has accelerated modestly to 2.07 percent in September while industrial activity has remained robust with core sector growth at 6.3 percent and IIP at 3.5 percent. “The macro backdrop is supportive: fiscal and monetary policies are accommodative, and external risks are offset by resilient domestic consumption,” Vora said.

Meanwhile, PL’s Multi-Asset Dynamic Portfolio (MADP) too has outperformed in September, gaining 3.77 percent versus 1.53 percent returns by its benchmark, driven by gold and smallcap shares. The fund has maintained a defensive yet diversified allocation, holding around 30 percent in gold and the remainder across large, mid and smallcap names. Over the past three years, PL’s MADP has delivered 14.1 percent annualised returns, ahead of its benchmark’s 12.5 percent.

Vora also said the earnings downgrade cycle may be bottoming out, setting the stage for potential upgrades in the December quarter. “We expect near-term markets to remain range-bound with a positive bias, but medium-term drivers — rate cuts, GST reforms, and consumption revival — are aligning to create a favourable risk-reward,” he added.

This stance is in contrast to many large PMS and mutual fund peers who continue to stay cautious amid global uncertainty. PL’s pivot toward cyclicals - alongside a constructive mid-cap tilt and rising beta - suggests growing confidence that India’s next phase of outperformance may be led by financials, materials, and industrials, rather than defensives.

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