HNI portfolios need reset, not fresh equity aggression despite sharp correction: Nuvama Wealth’s Rahul Jain

Indian equity markets corrected sharply by roughly 12% alone in March amid geopolitical tensions and crude oil volatility. After 12-18 months of calling Indian equities expensive and pushing clients toward higher debt, Nuvama Wealth’s President, Rahul Jain now sees the steep March correction as a genuine opportunity.

However, he warns that strong rallies over the past five years have left many HNIs significantly overweight in equities. Jain is advising smart staggered rebalancing — not aggressive lumpsum buying — as geopolitical risks and volatility remain high.

Now that Nifty’s forward valuations now sit comfortably below 16 times on conservative FY28 EPS estimates of around 1,400, compared with the long-term median closer to 20 times.

“Recent corrections have created the need to rebalance portfolios,” Jain added. “We are advising clients to do this in a staggered manner over the next 12 months rather than going all-in on equities at once.”

Here are edited excerpts

Q: For over a year, wealth managers have been flagging stretched valuations. But now, has the recent correction meaningfully changed your stance on equities?

A: For the last 12 to 18 months, we were viewing markets to be expensive, advising clients to have a higher allocation towards debt. Although a subtle trend analysis would reveal they were running equity-heavy. There has been both a time correction and some valuation correction. Now, after this correction of around 10 to 12% alone in March, this seems like an opportunity to rebalance portfolios. From an earnings perspective, we are looking at a conservative FY28 EPS of around 1,400 for the Nifty at current levels of around 22,00023,000. Valuations come to less than 16 times versus a median closer to 20 times, meaning that valuations are more reasonable now. Because of that, it makes sense to start allocating towards equities again although not in one go. The environment is still very volatile — geopolitics, crude, global factors — there are a lot of uncertainties. So one can’t say that markets will not fall further. That is why the approach is to invest in a staggered manner over the next 12 months, rather than allocating in one shot.

Q: Beyond valuations, is the bigger issue now portfolio positioning? Have allocations become misaligned after the rally of the past few years?

A: Yes, that is in fact a key issue. Over the last five years, equity allocation in portfolios has increased significantly, largely because of returns. Earlier, we used to push clients to increase equity allocation. Now in many cases, we have to push them to reduce equity and increase debt. Hence a lot of portfolios today are skewed towards equity. That suggests rebalancing hasn’t kept pace. It could be mostly a behavioral stance more than a market one. But rebalancing does not happen automatically. When markets go up, people are comfortable increasing allocation. When markets fall, they hesitate to reduce equity. So, behaviour becomes reactive unless there is active advice.

Q: Are you seeing differences in how various investor segments are responding to the current market jitters?

A: Family offices have always been more process-driven. They are clear about allocation, liquidity, and risk buckets. Typically, there is a CIO or fund manager managing the money, so decisions are less emotional. HNIs tend to be more directly involved in decision-making, so behaviour can be more reactionary. When it comes to panic-led decision-making, family offices are more mature.

Q: Within equities, are you taking any sectoral views at this stage, or is the focus still on allocation rather than selection?

A: We generally don’t give strong sectoral views. We believe selecting the right fund manager is a better approach, and they will allocate to the right sectors. But broadly, areas like defence, consumption, private banks, and some infra or AI-linked themes can do well. Out of these, both defense and AI are themes that are majorly picking up momentum across the private market.

In listed equities, there are no very clear direct opportunities in a big way right now. Defense remains our strongest conviction because of the indigenous manufacturing push, geopolitics, and policy support — private players and precision-engineering/high-tech component companies look particularly attractive (a diversified basket of 8 to 10 stocks works well).

Indian consumption is an evergreen defensive sector; rural demand is showing clear improvement after GST and income-tax relief. Private sector banks have seen meaningful valuation correction with clean balance sheets. Infra and AI-related themes (especially power utilities) also stand to benefit from data-center and energy demand.

Listed equity opportunities for direct AI plays (like data centers) are limited. Power companies offer indirect exposure. Land suitable for data-center development is another interesting way to participate. The real opportunity lies in India’s thriving AI-native startup ecosystem across sectors — best accessed via Category-1 AIFs (startups) or Category-2 AIFs (pre-IPO/private-to-public).

Q: Are you seeing incremental allocations into AIFs and PMS currently, or has risk appetite moderated after the correction?

A: We are seeing a more nuanced trend rather than a binary shift. The shift is structural, particularly to strategies within the AIF space, given the opportunities they offer. The risk appetite is intact; however, investors have become even more discerning, leading to slower decision cycles. They are demanding higher quality, better entry pricing, and clearer exit visibility. On the PMS front, investor preference is increasingly changing towards ‘consistency of returns’ and moving away from ‘alpha’.

Q: You mentioned earlier that the equation between public and private markets is changing. What exactly is driving that shift?

A: Earlier, private markets were clearly cheaper than public markets. Now I feel that public markets are cheaper than private markets. With a research-driven approach, you can find good companies in public markets at reasonable valuations. Public equities adjust quickly and continuously based on earnings revisions, liquidity conditions, and global risk sentiment, while private market valuations reset more slowly during funding rounds or mark-to-market events (typically 2 to 4 quarters).

Q: How are you thinking about gold in portfolios at this stage?

A: Gold has always been an important part of asset allocation — typically around 5 to 10%. But in the current environment, its role becomes more relevant. It acts as a store of value in such situations. I won’t term it as ‘frothy’. If it goes very high, you can reduce the allocation to 5–6% from 10%. If it goes low, you can increase. Because of the whole theme of de-dollarization and geopolitics, people will go into something which is more reliable, more credible — and gold in that sense is a good alternative.

Q: With some underperformance in Indian equities recently, are you seeing investors look more aggressively at global markets?

A: There is some increase in interest in global allocation. But overall, India remains fairly valued, and if you are not already invested, it still makes sense to allocate here. Global allocation should be part of portfolios, but not necessarily very aggressive unless there is a specific requirement. The US continues to be a significant choice (even at 10% of the offshore allocation for UHNIs and HNIs). In terms of global themes, AI as a bubble is pushing investors to scrutinize stricter and spot better opportunities outside AI — other sectors like financials, general technology, and manufacturing look relatively more reasonable. As an offshore destination, China always comes up as a potential name, but the current regime is always a difficult factor.

Q: How are you viewing near-term risks — geopolitics, crude, or DII/SIP flows?

A: Geopolitical conflicts and crude volatility were key drivers of the March correction. Predicting 3 to 6 month war impacts is extremely difficult — we advise playing week-by-week and focusing on portfolio reviews rather than dramatic shifts. DII and SIP flows have a strong long-term structural story (rising incomes, formalization), though short-term moderation is possible if returns disappoint newer investors who haven’t experienced a deep correction.