Sector rotations and outperformance of stocks signals a healthy bull market in India: JioBlackRock CIO Rishi Kohli

Unlike traditional methods, risk and cost are built into portfolio construction from the start, creating a risk-aware and cost-efficient portfolio.

While the last year has been sluggish, JioBlackRock Mutual Fund CIO Rishi Kohli is optimistic for Indian markets and expects things to stabilise over the next few quarters. In conversation with Moneycontrol on the sidelines of the launch of the AMCs first Equity fund – Jio BlackRock Flexi Cap Fund, Kohli spoke about why the AMC believes it is the right time to be in the Indian market, how BlackRock’s proprietary Systematic Active Equities will give their funds an edge, and the impact of GST and US H1B rules rejig and more.

Edited excerpts:

How are you looking at the India market currently?

Over the past year, the Indian market has been sluggish. Earnings growth has been subdued, coinciding with slowdowns in certain sectors, while global macroeconomic factors and geopolitical events have added uncertainty. However, nothing has been dramatically negative, so the market has avoided a sharp decline and moved sideways. Over the next one to two quarters, conditions are expected to improve, particularly if global trends stabilise. Some volatility may persist until Diwali, followed by a potential bounce to New Year, and then further volatility between January and March.

How would you define the core investing strategy for Jio BlackRock?

Systematic Active Equity is an active strategy even though it is process- and data-driven. The portfolio intentionally differs from the index—holding fewer stocks (for example, about 130 of 500) and allowing sector weights to vary within set limits. It follows a systematic process that combines fundamental analysis with alternative data such as credit card transactions, job postings, and online activity. These real-time signals provide an early view of company or sector trends, enabling quicker decisions and the potential to capture alpha ahead of quarterly results.

Unlike traditional methods, risk and cost are built into portfolio construction from the start, creating a risk-aware and cost-efficient portfolio. The approach is consistent rather than conservative: aiming for top-quartile alpha while keeping downside volatility in check.

What is your view on the IT sector, especially with the recent H1B visa changes?

IT has underperformed over the past six to nine months, as earnings growth has slowed. Concerns around AI and H1B visas are largely priced in. The actual impact is minor for large firms, affecting one to two percent of earnings, while mid- and small-cap companies may see slightly bigger effects. Overall, it remains a stock-specific story rather than a sector-wide concern.

How do you see GST affecting consumption sectors such as autos and FMCG?

Autos are likely to benefit from lower GST, which reduces prices and encourages purchases. FMCG, however, is less affected; people do not buy more everyday items like shampoo just because taxes are lower.

What is Aladdin and how is it tailored for India?

Aladdin is a proprietary integrated platform combining data intake, model building, portfolio generation, trading, and risk management. For India, we incorporate local data and a proprietary India risk model, complying with regulatory requirements like stock exposure limits.

How do you see India compared to global markets?

India typically trades at a premium to other emerging markets. Using price-to-earnings-growth ratios, valuations remain reasonable given India’s growth prospects. While short-term opportunities exist elsewhere, India is attractive over a five- to ten-year horizon. Over the last 10–12 years, India’s market breadth, depth, liquidity, and data quality have improved significantly. Ten or twelve years ago, it might not have made sense for BlackRock to enter, but now it does. Our focus is long-term growth, not short-term performance. Even over the past year, sector rotations and outperforming stocks (when the market is falling) indicate a healthy bull market, showing that India offers sustained opportunities.  We’ll continue launching products across categories, ensuring we have the right offerings as the market grows

Why launch in the equity space with a Flexicap fund?

Flexicap provides the largest investable universe, the NSE 500, which suits a systematic strategy benefiting from diversification. The wide universe and market dispersion create more opportunities for alpha. Backtests since January 2015 show annualised alpha of slightly over 4 percent.

Will weekly rebalancing of the portfolio hurt returns?

Our process balances risk and return across the portfolio. Short-term sector weakness may hurt performance temporarily, but other sectors offset this. The goal is overall alpha at the portfolio level.

The fund has a lower TER? How does that work out?

The direct plan’s expense ratio is around 0.5 percent. The use of Aladdin allows efficient operations with lower costs directing benefits to the investors.

Could your model end up overweighting certain sectors even if you do not target sectors directly?

The model is benchmark-aware but not index-replicating. If a sector is 10 percent in the benchmark, our allocation may range between 7 and 13 percent. Sector composition is where we generate alpha.