While such uncertainties may trigger short-term volatility, Jorwal emphasizes the importance of staying disciplined, maintaining diversified portfolios, and using global allocation and rebalancing strategies to navigate these evolving risks effectively. Edited Excerpts –
Q) Geopolitical tensions seem to be escalating across regions. How should global investors interpret these developments from a macro and market perspective?A) Over the past few years, global markets have had to navigate several geopolitical flashpoints—from the Russia–Ukraine conflict to the ongoing tensions in the Middle East.
These events matter primarily because of their impact on energy supply, trade routes and global supply chains, which in turn influence inflation and growth expectations.
These in-turn also affect the monetary & fiscal policies. For example, the Strait of Hormuz carries nearly 20% of the world’s oil supply, so any disruption there can quickly push crude prices higher and influence global inflation expectations.
Similarly, tensions that affect key shipping routes can increase freight costs and disrupt supply chains, creating short-term uncertainty for businesses and markets.However, from a market perspective, history suggests that geopolitical shocks tend to create short-term volatility rather than long-term structural damage.
Over the past 25 years, multiple global conflicts have triggered corrections and heightened volatility, yet the market has in most cases delivered double-digit returns over the following 12–24 months as uncertainty gradually eased and economic fundamentals reasserted themselves.
For long-term investors, these periods often present the most compelling opportunities to accumulate high-quality businesses at attractive valuations. The key is navigate such periods with discipline, patience, and courage.
As the uncertainty eventually settles—as they always do—those who stayed invested and acted decisively during the turbulence are typically the ones who emerge strongest.
However, geo-political uncertainty has become more frequent than earlier. Hence, the need is to construct the portfolio across asset classes to have diversification, following the investment charter and remain committed to that while managing strategic and tactical allocation inline with one’s objective.
Q) Historically, markets tend to react sharply to geopolitical shocks but recover quickly. Is it time to diversify globally and which markets are looking attractive?
A) Global diversification is becoming increasingly relevant for Indian investors, not just from a return perspective but also for currency and opportunity diversification.
While India remains structurally strong—with GDP growth of ~6–7% and healthy earnings outlook—it represents only a small share of global market capitalisation, whereas markets like the MSCI World Index are heavily dominated by the United States at ~60–65%. This highlights the need to look beyond domestic markets to access a broader opportunity set.
A key driver is also currency diversification—investing globally allows exposure to stronger currencies like the US dollar, which can help hedge against long-term rupee depreciation.
Markets like the US, Taiwan, South Korea, and Japan offer access to sectors such as AI, semiconductors, and advanced manufacturing—areas where India has limited representation.
The idea is not to replace India exposure but to complement it—combining India’s domestic growth story with global innovation and sector leaders. This balanced approach helps improve portfolio resilience while capturing growth opportunities across geographies.
Q) How could rising crude oil prices and commodity volatility reshape the global investment landscape?
A) Rising crude oil prices and commodity volatility can significantly reshape the global investment landscape by influencing inflation, growth, and capital flows.
For India, which imports over 85% of its crude needs, sustained high oil prices typically lead to higher inflation, a wider current account deficit, and pressure on the rupee due to increased dollar demand.
This can weigh on consumption and delay interest rate cuts, impacting overall market sentiment. Globally, elevated energy prices tend to keep inflation sticky, limiting central banks’ ability to ease monetary policy and potentially slowing economic growth.
However, the impact is uneven—energy-exporting economies benefit from higher prices, while import-dependent countries face macro pressures. This divergence is important for global asset allocation.
At the same time, commodity dynamics are being reshaped by structural trends. The energy transition and electrification are driving demand for materials like copper, lithium, and nickel, while oil and gas remain critical in the near term.
Additionally, the rapid growth of AI and data centres is increasing global energy demand, linking technology growth more closely with power and commodity markets.
From an investment perspective, this environment is leading to greater interest in real assets and commodities as both inflation hedges and structural plays.
Gold continues to act as a safe haven during geopolitical uncertainty, while metals linked to clean energy and infrastructure are gaining traction.
Overall, commodity volatility is pushing investors toward more diversified portfolios that balance traditional assets with exposure to energy, metals, and global macro themes.
Q) What role does rebalancing play during volatile periods when asset prices move sharply due to geopolitical shocks?
A) Rebalancing is a key discipline during volatile periods, as sharp market moves can quickly shift portfolios away from their intended allocation.
We typically recommend rebalancing either periodically or when allocations deviate by around 5–10%.
This helps investors trim assets that have risen sharply and redeploy into areas that have corrected, enforcing a “buy low, sell high” approach.
Volatility also creates opportunities to add to fundamentally strong assets that may have fallen due to market sentiment rather than real weakness. Over time, consistent rebalancing improves portfolio stability and enhances risk-adjusted returns.
Q) How can investors use ETFs to achieve better asset allocation across equities, debt, gold and international markets?
A) ETFs have become a practical way to build diversified portfolios across equities, debt, gold, and international markets, offering broad exposure in a transparent and relatively low-cost format.
However, investors need to be mindful of a few practical aspects. Liquidity is critical—while large ETFs trade efficiently, less liquid ones can have wider bid-ask spreads, especially for sizeable investments.
Prices may also deviate from the underlying value due to demand-supply dynamics, particularly in volatile markets or in segments like debt , international ETFs.
In addition, ETFs require a demat and trading account, and investors incur brokerage costs on every transaction, which can add up over time compared to some traditional products.
When these factors—liquidity, pricing efficiency, and transaction costs—are carefully considered, ETFs can be effective tools for disciplined asset allocation and portfolio rebalancing.
Q) Which global ETF themes—such as technology, semiconductors, or global indices—do you believe investors should track in the current environment?
A) As investors rethink allocations amid shifting global dynamics, international exposure serves as a valuable complement to India’s structural growth story.
Select global markets offer reasonable valuations, attractive earnings growth potential, and increasing institutional participation, making them compelling for long-term investors.
A balanced approach could include large, stable economies like diversified basket of Emerging Markets, US and thematic ETFs focused on AI, semiconductors, defence, blockchain tech and other high-growth sectors, rather than taking overly granular or speculative bets.
US continues to account for the largest share of global equity market capitalisation and houses many of the world’s leading technology companies. Emerging markets present a good mix of technology, commodities and consumption growth stories. China (~25% weight in EM basket) continues to be one of the largest economies in the world and a major driver of global manufacturing and commodity demand.
Q) Ideally what percentage of capital should be diversified globally for someone who is 30–40 years old? And if someone wants to deploy fresh capital what would you advise?
A) For Indian investors, allocating around 10% of the equity portfolio to global markets is a sensible approach, regardless of age.
The benefits—access to opportunities not available in India, hedge against currency depreciation or benefit from it, and broader diversification to reduce risk—apply to all investors.
This global allocation can be spread across Emerging Market ETFs, broad US market ETFs, and thematic ETFs focused on technology, AI, semiconductors, and data centres, offering both structural growth and exposure to global innovation.
For deploying fresh capital, a staggered investment approach is recommended to manage market volatility.
Investors can leverage the Liberalised Remittance Scheme (LRS), which allows outward investment of up to $250,000 per financial year, or newer platforms through GIFT City, which are gradually broadening access to global markets.
This approach helps investors systematically build meaningful global exposure while maintaining India as the core of the portfolio.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)