Allocate 10–20% globally; stagger investments amid volatility: Alekh Yadav, Sanctum Wealth

Speaking to Kshitij Anand of ETMarkets, Alekh Yadav, Head of Investment Products at Sanctum Wealth, underscores the importance of global diversification, recommending investors allocate 10–20% of their portfolio to international assets.

While opportunities remain in regions such as emerging markets and Japan, Yadav advises a staggered approach to fresh investments, given currency fluctuations and the evolving macro landscape.

He also highlights the need for disciplined rebalancing and selective exposure to commodities as investors navigate an increasingly complex global environment. 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) The Middle East conflict is causing a major oil shock, with nearly 20% of global supply affected via the Strait of Hormuz. With very limited alternatives oil prices could rise sharply. If the conflict ends soon, markets may rebound, making current levels attractive for long-term investors, though oil may take time to stabilize and the economy could see short-term weakness.

If it drags on, sustained high oil prices could slow economic activity, raise recession risks, and lead to further declines in global and Indian equity markets.

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) This situation differs from most past geopolitical shocks because it directly impacts the global economy. Given the uncertainty, global diversification remains important.

Before the conflict, emerging markets and Japan looked attractive. We continue to like them but would suggest adding them more gradually. While some emerging economies are hurt by higher oil prices, energy-exporting countries may benefit.Japan, though an energy importer, is showing structural improvement as it emerges from a long phase of low growth and disinflation, supported by better corporate governance.Q) How could rising crude oil prices and commodity volatility reshape the global investment landscape?A) Even if the conflict ends quickly, countries are likely to rebuild strategic reserves, keeping global energy prices elevated and inflation higher for longer. This typically puts pressure on equity valuations, especially growth stocks, while supporting value and commodity-linked sectors.

In the meantime, energy-exporting countries and sectors such as oil, gas, and mining are likely to benefit, whereas import-dependent economies may face margin pressure, currency weakness, and slower growth..

Q) What role does rebalancing play during volatile periods when asset prices move sharply due to geopolitical shocks?A) Sharp movements in asset classes can disrupt portfolio balance. Rebalancing restores the intended allocation by correcting these shifts, helping manage risk, prevent overexposure, and position the portfolio for recovery.

Q) Which global ETF themes—such as technology, semiconductors, or global indices—do you believe investors should track in the current environment?A) We currently prefer a globally diversified approach, with an overweight stance on emerging markets and Japan, and an underweight position in U.S. equities. We also favour the commodities sector and look to gain exposure through global commodities ETFs, as direct investment in commodities is not available in India.

Q) Ideally what percentage of capital should be diversified globally for someone who is 30-40 years? And if someone wants to deploy fresh capital what would you advise?A) We recommend allocating 10–20% of capital to global diversification. For those considering this now, a staggered approach may be prudent, especially given the recent sharp depreciation in the currency.