Riding the Cycle: Finding Alpha When the Index Runs Out of Steam

In the midst of rising global volatility and fresh trade tensions led by the U.S., PMStimes hosted a timely and insightful webinar with Mr. Anil Rego, the veteran investor, strategist, and founder of Right Horizons PMS. With markets digesting Trump’s 25% tariffs on Indian exports and possible penalties for BRICS alignment, the session couldn’t have been more relevant.

Mr. Rego, known for his structured thinking and deep market experience, walked investors through Right Horizons’ investment frameworks, market views, and how his team continues to identify alpha even as broader indices appear fatigued. His message was clear: macro tremors are real, but India remains on a structural upcycle — and that’s where process-driven investing matters most.

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Why India Still Stands Tall — Even Amid Tariffs

Despite the noise around U.S. tariffs and BRICS-related penalties, Rego emphasized that India’s domestic growth engine remains intact. He pointed out that India's export-to-GDP ratio is modest, and many high-risk sectors like IT services remain outside the current tariff net.

"Yes, we may see short-term pain in textiles, gems, and auto components, but the long-term India story is still very strong."

He also highlighted that India’s per capita GDP crossing $2,000 is historically a launchpad for exponential consumption growth — a signal already visible in sectors like branded jewelry, premium retail, and financial services.

Mid & Small Caps: Still Room to Run — But Stay Selective

Even with frothy valuations in midcaps (especially Nifty Midcap 150), Rego believes that the rally isn’t done yet — thanks to strong SIP flows, manufacturing tailwinds, and earnings momentum.

However, he cautioned against over-exuberance and emphasized being valuation conscious, especially in small-cap and micro-cap segments.

"Liquidity drives price, but fundamentals sustain it. We’re staying in the game, but we’re being choosy."

Valuations: Caution, Not Panic

Despite mid and small caps feeling frothy, Rego dismissed the idea of an imminent collapse.

“Nifty valuations are still below the 5-year median. Midcaps may be stretched, but earnings growth is supportive.”

He acknowledged the role of persistent domestic liquidity — particularly SIPs — in keeping markets buoyant, even as FIIs turn cautious.

STP, Not SIP: Timing the Deployments

In volatile times, Rego advises phased entry using 3-month STPs, especially when deploying large sums.

"Don’t fear volatility — use it. Structured entry helps mitigate timing risk while staying invested."

RH’s Process: Where Philosophy Meets Precision

Rego shared how Right Horizons’ strategies are grounded in risk-adjusted returns, not just growth chasing. Their four-pillar investment engine includes:

• RH Screener: Filters 1,300+ companies down to ~125 with strong financial and governance filters

• RH Scorecard: Deeper dives on growth, margins, RoCE, valuations, and forensic checks

• RH Risk Radar: Pre-emptive risk controls to avoid governance blowups

• RH Pendulum: Framework for buy/sell zones based on valuation bands

"We look for companies with moats, manageable valuations, and early institutional interest — that’s where the real multibaggers emerge."

Sectoral Bets: Where RH is Placing Its Chips

• Avoids real estate directly, but likes building materials and branded consumption plays

• Bullish on wealth management as equity allocation in Indian households rises from 4.7% to a projected 10%

• Selective in IT, favoring AI and data-led disruptors

• Constructive on pharma, despite tariff risks, given global cost advantages and evolving export destinations

"We prefer businesses aligned with India’s per capita growth story and structural tailwinds."

Takeaways: What Investors Can Do Now

• Be India overweight, but diversify beyond export-exposed sectors

• Avoid chasing momentum blindly in midcaps — apply valuation discipline

• Consider STP-based deployments if nervous about lump-sum investing

• Use hybrid strategies like RH Alliance for income with inflation protection

• Look at thematic opportunities in defense, building materials, financialization, and branded discretionary consumption

• Gold remains a strategic hedge, especially in an environment of loose fiscal discipline and USD depreciation risk

The Conclusive Thought

When everything looks negative — that's often where the biggest opportunities lie. Stay invested, stay disciplined, and don’t let the headlines derail your long-term goals."— Anil Rego

The session reinforced that cycles don’t end — they evolve. For those riding with process, patience, and prudence, alpha still lives beyond the index.