Whalesbook
Naren Advocates Equity Over Standalone Gold and Silver Bets
Sankaran Naren, executive director and chief investment officer at ICICI Prudential Mutual Fund, has advised investors to exercise caution with standalone investments in precious metals like gold and silver, especially at current valuations. He suggests that equity schemes offering flexibility across sectors and market capitalizations, alongside asset allocation schemes with a greater equity tilt, present a more attractive risk-reward proposition.
Valuation Concerns and Earnings Outlook
Corporate revenue and profitability saw significant improvement in Q2FY26, with the Nifty 500 (excluding the Nifty 50) reporting a 30.7% rise in Profit After Tax (PAT). Naren anticipates a stronger earnings outlook for FY26 compared to FY25, benefiting from anticipated lower interest rates, GST rationalization, and income tax cuts. However, he acknowledges that the market is not broadly undervalued, and elevated valuations coupled with substantial equity supply are likely to cap overall market returns.
Key Market Triggers and Global Context
The market is keenly observing the potential conclusion of an Indo-US trade deal, which Naren identified as a positive trigger. He also believes the Indian Rupee is currently undervalued and could see meaningful appreciation post-trade treaty signing. Globally, while India remains a high-growth story with attractive tariff regimes and low oil prices, Naren cautioned that significant corrections in global stock markets, currently trading at their highest valuation as a percentage of GDP in a decade, could have spillover effects. India's valuation at over 20x forward (FY27) earnings makes it more expensive than China and South Korea, potentially influencing foreign portfolio investor (FPI) flows.
Asset Allocation Guidance
Naren stressed that optimal asset allocation depends on an individual's risk profile, time horizon, and financial goals. He reiterated incremental constructiveness on equities, suggesting investors explore equity schemes and asset allocation strategies with higher equity components. For precious metals, he noted their inherent difficulty in valuation due to the absence of earnings, book value, or dividend yield, making them less attractive as standalone investments compared to multi-asset or asset allocation approaches.