Chief Investment Officer
Pramerica Life Insurance
As Indian markets grapple with sectoral divergence amid global uncertainties, Chief Investment Officers face the complex challenge of balancing long-term value creation with short-term volatility management. In this comprehensive interview, Abhishek Das, Chief Investment Officer at Pramerica Life Insurance, shares his insights on the current market landscape, from the underperformance of IT and auto sectors due to FII selling pressure to the defensive strength emerging in sectors like defense and financials. With the RBI’s recent 50 basis point repo rate cut reshaping fixed-income strategies and geopolitical tensions in West Asia creating oil price volatility, Das discusses how institutional investors are adapting their portfolio allocation strategies. He delves into the nuanced approach required for managing ULIP and non-par funds, emphasizing the importance of dynamic duration strategies, quality-focused equity selection, and disciplined risk management frameworks that prioritize capital preservation while optimizing returns in an increasingly complex investment environment.
CISO Forum: What’s driving the current sectoral divergence in Indian markets, and how sustainable is this momentum given global headwinds?
Abhishek Das: In the last few months, we saw sectors like IT and Auto experiencing extended selling and generally underperforming the market. This was largely because FIIs sold out of IT sector stocks, given the volatility in the US markets and concerns of a wider economic slowdown there. Indian IT companies with significant exposure to US banks saw analysts lowering their growth estimates. The Auto sector was also not favored, as demand slowed down—especially for four-wheelers—and the industry witnessed a significant inventory pile-up. Further, the volatility brought about by the Trump tariffs resulted in sharp movements in sectors with US exposure, such as textiles and chemicals.
On the other hand, defense emerged as a clear winner, given the escalations in geopolitical conflicts in West Asia as well as in our neighborhood. With the recent higher-than-expected repo rate cut of 50 bps by the RBI, sectors like financials—especially PSU banks and housing finance companies—and real estate should witness sustained interest over the short to medium term.
Most of these trends are reactive to prevailing domestic and geopolitical scenarios. For the medium to long term, we remain optimistic about India’s rural growth, infrastructure, and capex-led narrative. With valuations also not being cheap, this will be a stock picker’s market.
CISO Forum: How has the RBI’s recent dovish stance influenced your fixed-income strategy and overall portfolio allocation?
Abhishek Das: In the recently concluded RBI MPC meeting, the RBI cut the repo rate by 50 bps from 6.00% to 5.50% and changed its stance from ‘accommodative’ to ‘neutral.’ Additionally, the Cash Reserve Ratio (CRR) was reduced by 100 bps.
These three moves were not anticipated by the market, making this policy action particularly significant. However, the RBI also indicated that there is limited space for further rate cuts, effectively putting a pause on any near-term rate cut expectations. Going forward, policy decisions will be data-dependent, suggesting a prolonged pause in the rate cycle. The market reaction post-policy has been negative, reflecting the cautious forward guidance on rate cuts by the RBI.
These policy actions have made us re-evaluate our interest rate outlook from a medium-term perspective. While a more accommodative stance could have brought the terminal repo rate down to 5.25% or even 5.00%, that path now appears closed. We now expect a prolonged pause with the repo rate at 5.50% and expect the 10-year G-Sec to consolidate in the 6.00%–6.25% range.
From a portfolio allocation perspective, this creates a good opportunity for accrual fixed-income assets like corporate bonds for the short term, and long-term securities for the medium term, as yields are expected to remain low. It also provides diversification benefits, particularly when equity valuations remain elevated relative to long-term averages.
CISO Forum: With West Asia tensions and oil price volatility, how are you adjusting investment strategies to manage geopolitical risks?
Abhishek Das: The geopolitical scenario in the Middle East has become extremely fluid and dynamic, with key moving variables changing daily. Initially, when the conflict flared up, we saw a sharp spike in crude oil prices, which threatened to derail a large section of the global economy. However, at the time of writing this article, things appear to have cooled off. Given how dynamic the situation has been, we have ensured a minimal amount of risk in our portfolio by taking strategic calls to lower our weights in sectors most exposed to crude volatility.
CISO Forum: How do you maintain disciplined asset allocation for long-term value while managing short-term market volatility?
Abhishek Das: Maintaining disciplined asset allocation for long-term value creation while navigating short-term market volatility requires a combination of strategic planning and dynamic risk management. Here’s how this can be done effectively:
- Defining strategic asset allocation while establishing long-term goals, considering the mandates of shareholders and policyholders. An asset mix comprising equity, debt, alternatives, and cash is built considering risk tolerance, liquidity needs, and time horizon.
- Allocating a limited portion (e.g., ±10%) of the portfolio to make short-term positional calls based on market valuations, interest rate outlook, and geopolitical developments.
CISO Forum: How do current macro trends influence your approach to managing ULIP and non-par funds for policyholder value?
Abhishek Das: As mentioned earlier, for ULIPs we adopt a dynamic duration-based strategy for ULIP debt funds and balance long-term value creation with short- to medium-term macroeconomic realities for equity funds. We incorporate both global and domestic macro trends.
We are currently marginally overweight on duration to take advantage of benign global interest rates, surplus liquidity from the RBI, and moderating inflation expectations. This also influences our sector allocation and investment style in equity funds. We are tilting towards quality and growth sectors that benefit from lower interest rates (e.g., banking, consumer, select tech). In phases of economic uncertainty, we also add defensives like FMCG and healthcare to reduce downside risk. Additionally, cyclical exposure is adjusted tactically based on economic momentum and fiscal policy cues.
For non-par funds, the focus is on capital preservation, predictability of returns, and liability alignment. We follow a cash flow matching approach to ensure asset-liability alignment, using tools like interest rate derivatives to hedge our liabilities. In the current macro environment—where long-term yields are stable and inflation is relatively anchored—we are maintaining a high-quality fixed-income portfolio structured to meet guaranteed obligations while optimizing yield within a tight risk framework. We have also developed a very strict credit analysis model, and any exposure to corporate bonds must satisfy the criteria laid out.
CISO Forum: As a CIO managing customer funds, how has your investment philosophy adapted to today’s complex risk-return environment?
Abhishek Das: We have tried to ensure our decision-making is tuned to the rapidly evolving investment environment. We employ a holistic approach to fund management that extends beyond traditional metrics like value and growth. Ideally, we prioritize companies with strong balance sheets, healthy cash flows, and pricing power.
Marking a departure from traditional long-only investing, we strive to actively rebalance based on evolving macro signals and sectoral momentum. We aim to maintain a fluid relationship between growth and value strategies to maximize return potential, given the divergent and dynamic nature of Indian capital markets. On the fixed income side, we remain agile to term spreads and opportunities in the credit market. Overall, asset managers need to stick to entities with strong financials and follow a very strict risk-return evaluation framework.
