Due to macro stability and recent trade deals, Indian markets have seen an enhancement in earnings visibility, creating new opportunities after a correction phase. PL Asset Management’s report suggests a Dynamic allocation strategy with a gold hedge for investors. This strategy involves dynamically adjusting exposure across equities and gold based on macro signals, valuation metrics, and volatility regimes.
The market is transitioning from a correction phase to one of emerging opportunities as valuations normalize, domestic liquidity remains strong, and internal risk indicators stabilize. Indian equities experienced a consolidation phase in January 2026 amidst global de-risking, currency pressures, and commodity volatility. Equity valuations have moderated to around 19–20x earnings, improving the medium-term risk-reward profile.
Quantitative indicators indicate a potential shift from consolidation to early recovery, despite narrow market participation during the correction. Siddharth Vora, Head of Quant Investment Strategies & Fund Manager at PL Asset Management, mentioned that Budget clarity and strengthened trade linkages are boosting earnings visibility, positioning for the next recovery phase. The Union Budget 2026’s focus on fiscal prudence, growth, capex, infrastructure, and manufacturing reforms is expected to enhance earnings visibility across various sectors.
The ‘value’ factor has outperformed recently, signaling a gradual portfolio repositioning by investors. Equities are currently trading near multi-cycle relative lows compared to gold, which could lead to improved forward return probabilities as volatility stabilizes. The firm also anticipates a shift towards higher beta and cyclical sectors, indicating an improving risk appetite in the market.
