The uncertainty over US trade tariffs has turned the equity market volatile and scared away investors. Anand Radhakrishnan, MD and CEO, Sundaram Mutual, spoke to businessline on the way ahead for mutual fund investors. Excerpt:
Do you expect volatility in the equity markets to persist given the global developments?
Global equity markets remain sensitive to evolving developments, particularly around trade and tariff negotiations involving the US and the outcomes of ongoing geopolitical conflicts. These factors could influence global growth expectations and impact equity segments that are heavily reliant on developed market demand. Markets currently seem to be pricing in a moderation in tariff escalation as the base case. From India’s standpoint, several domestic buffers such as continued government spending, front-loaded monetary easing by the RBI, and a pickup in rural macro indicators are expected to soften any external shocks. Moreover, India’s macro fundamentals remain strong—corporate leverage is at decade lows, fiscal consolidation is on track, the currency and current account are stable, and services exports continue to rise. These factors support the view that India may experience relatively lower volatility compared to global peers. We expect domestic equity markets to navigate global developments with incremental focus shifting towards the impact of rate transmission in the system and the resulting change to the broader economy on account of easier financing and improved consumption.
What would be the impact of Trump’s tariffs on India?
It has introduced fresh uncertainty into global trade flows. Markets are monitoring developments closely as the deadline approaches, awaiting further shifts in the landscape before determining their next steps. India’s immediate impact of the new tariffs seems moderate. However, nothing is confirmed yet, and the final impact will depend on the actual agreement details. We have to reassess the broader impact once the deal terms are formalised, especially in export-oriented sectors such as pharma, textiles and auto components.
Given the corporate earnings expectations for the next two fiscals, do you think the market is overvalued?
While headline valuations are slightly above their long-term median, they remain within a reasonable range, especially when viewed against India’s evolving growth dynamics. Several parts of the economy are expanding at a healthy pace, and we are beginning to see signs of private capex revival, particularly in sectors aligned with policy support. The market may not have fully priced in the potential acceleration in credit growth, driven by easing liquidity and faster rate transmission. This could unlock a meaningful uptick in household consumption, adding depth to earnings momentum. While valuations are elevated, they are not disconnected from fundamentals. The real catalysts lie in earnings surprises, consumption recovery and the broader impact of monetary easing. These factors could help sustain market performance over the coming years.
How should mutual fund investors wade through this volatility?
Volatility is part and parcel of investment, but mutual funds are uniquely positioned to navigate it, thanks to the power of rupee cost averaging. For investors, it plays out through SIPs, allowing them to invest consistently across market cycles and accumulate units at varying price points. This helps average out the cost and reduce timing risk. For fund managers, the monthly inflows from SIPs and other channels provide a steady stream of capital that can be deployed into opportunities during market dips. The discipline of SIPs, combined with professional fund management, helps investors stay invested and benefit from compounding—even in uncertain times.
With a spate of NFOs hitting the market, how should MF investors decide on which fund to invest in?
Investors should look beyond the buzz and assess whether a new fund offers true portfolio differentiation. The key is to understand the fund’s construction approach—does it bring something new to the table or simply replicate existing strategies? For instance, our NFO — Sundaram Multifactor Fund — was built on a factor-based investment framework, which moves away from traditional, human-biased selection. Instead, it uses rule-based investing and diversifies across multiple factors—not just market cap or sector diversification. This makes it a more robust and forward-looking strategy. We have focused on making the portfolio future-ready.
Do you think investors should consider mid- and small-cap funds now?
Investor interest in mid- and small-cap funds remains strong, but it is important to approach these segments with a calibrated lens. Valuations across all market cap curves continue to trade above their long-term averages, indicating elevated pricing. We advise a balanced asset allocation for short-term portfolios to manage volatility. For long-term investors, any market correction could offer entry points into mid- and small-cap strategies—especially those backed by strong fundamentals and earnings visibility.
Should investors consider thematic funds, given that most have underperformed recently?
Thematic funds are designed for investors seeking differentiated exposure to specific economic trends. While they do carry higher risk, they also offer the potential for higher alpha when the theme is well captured. Recent market volatility has impacted returns across many thematic strategies, but this should be seen in context—not as a verdict on the concept itself. At Sundaram Mutual, we focus on broad-based thematic strategies that mirror India’s evolving growth story. Funds like Sundaram Services Fund and Sundaram Business Cycle Fund aim to tap into structural trends that span a significant portion of India’s GDP. They are diversified plays on long-term economic transformation. Thematic investing, when done with discipline and clarity of purpose, remains a powerful tool for portfolio diversification and alpha generation.