Saurabh Mukherjea has a three-pronged plan for Indian investors. Involve gold.

Copyright © HT Digital Streams Limited All rights reserved. Dipti Sharma 8 min read Oct 22, 2025, 5:30 am. IST Saurabh Mukherjea, Chief Investment Officer and Co-Founder of Marcellus Investment Managers. Summary Marcellus Investment Managers co-founder Saurabh Mukherjea outlines a portfolio strategy for Indian investors—one part local stocks, one part US smallcaps and midcaps, and one part gold. Saurabh Mukherjea has a simple message for investors in Indian stocks: it’s time to look beyond. The chief investment officer and co-founder of Marcellus Investment Managers believes that with jobs in India drying up due to US tariffs, consumption slowdown and tepid corporate earnings, it will be “difficult for a market that is already trading at record high valuations to move forward”. Mukherjea’s solution: A balanced portfolio—one-third each in Indian stocks, US small- and mid-caps, and gold. In this interview with Mint, Mukherjea, one of India’s most watched fund managers, also discussed the US tariffs, their impact on Indian jobs and domestic sectors where he still sees opportunities. Edited Excerpts: The past year has been a whirlwind of geopolitical tensions and market swings, but the Nifty hasn’t moved much. With returns rather muted and investors remaining cautious, what do you see as key risks and opportunities for Indian equities in the coming year? The biggest challenge for India right now is that earnings and profit growth have slowed sharply over the past two years, largely because white-collar job creation has stalled—even shrunk with IT layoffs. About 40 million white-collar workers indirectly support another 200 million in services, which form the backbone of India’s consumption engine. With jobs drying up, consumption, which is 60% of GDP, has stagnated, meaning earnings growth has slowed. And with earnings not growing, it’s hard for a market that’s already trading at record high valuations to move forward – that’s the core challenge. With earnings not growing, it is difficult for a market that is already trading at record high valuations to move forward. That said, the government has responded with tax cuts, GST cuts, RBI (Reserve Bank of India) rate cuts and a consumption boost. But it will take a few quarters to show results. The deeper issue remains: AI (artificial intelligence) and automation are reducing the need for white-collar workers, and in a labor-intensive country like India, this is a structural problem. Valuations are steep, which is why the market is struggling to move forward. How do you view the current geopolitical and macroeconomic landscape? Better opportunities lie abroad. US and European small- and mid-caps have delivered double India’s earnings growth over time at half the valuations. Despite Western volatility, this makes a strong case for diversification. Thanks to GIFT City, investing in Western stocks is now cost and tax efficient. At Marcellus, we built a Western equity team over three years ago, and many of us now hold half of our equity investments in those markets. Over the long term, both India and the US deliver 10–11% dollar returns with low correlation, making a 50-50 equity portfolio much more resilient. Currently, Western small- and mid-caps are particularly attractive: earnings growth averages 11–12% versus India’s 5.5–6%, while valuations are 15–25x versus India’s 30–50x. The mismatch – higher growth at lower valuations – plus, Trump-era fears among Western investors, creates a compelling opportunity for global diversification. India has been one of the worst performing markets in recent years, returning only around 3%, lagging behind both European and US markets. How do you read or interpret this trend? Every great free market economy goes through cycles. No country, including India or the US, moves in a straight line. India had three strong years post-Covid (2021-23), but the economy started to slow down late last year and has yet to recover. The core engine is stuck, and it may take another 4–6 quarters to turn over. The key point: if you stay invested in just one economy, you’re riding its full boom-and-bust cycle. Most investors buy at peaks and exit at lows. The solution is to diversify across economies with different cycles. For example, while India has slowed, the US economy remains strong with solid credit growth, job creation and record high markets. India had three strong years post-Covid, but the economy started to slow down late last year and has yet to recover. Those fully invested in India had a tough year, while those with a balanced India-US portfolio fared better. The same logic applied to US investors between 1967 and 1984—US stocks did not return in those years. This is why a 50-50 allocation between India and the US makes sense. It helps you to earn steadily, reduce stress, knowing that your portfolio is balanced and performing. What about other markets? Other stock markets do not exhibit the same low correlation with India that the US does. For example, India and other developing countries are more closely correlated due to similar emerging market dynamics, while India and the US differ significantly—technology-driven vs labor-driven economies; parliamentary vs presidential systems; market-led vs bank-led financial systems; and income levels. These differences make the US stock markets an ideal diversifier. What is your view on other markets, and how do you view gold and silver, which have risen more than 50% in the past year? Actually, gold is another diversifier. Its correlation with India is low, although long-term returns (6–7% in dollars) are lower than US stocks (10–11%). A portfolio split [across] About one-third India, one-third US, one-third gold can deliver 12–13% dollar returns (14–15% in rupees) with lower volatility. However, gold is currently expensive due to global risk fears—Trump, geopolitical tensions and Middle East conflicts. So it is better to wait for a price drop before increasing the allocation. If you already hold Indian stocks and gold, make them one-third each and allocate the last third to US small- and mid-caps. For diversification today, if you already hold India and gold, make them one-third each, and allocate the last third to US small- and mid-caps, which are trading at a 26-year low relative to the S&P 500. If you only hold Indian stocks, diversify 50% India, 50% US small/mid-cap to add gold, and wait for a better time. Do you suggest it might be wise to cut back on gold exposure? If you already have gold and it is more than a third of your portfolio, bring it down. The bulletproof portfolio will be: India one-third (Nifty 50), US one-third (S&P small and mid-cap), and gold one-third. Saurabh Mukherjea’s investment strategy Think globally: Don’t just rely on India—allocate part of your portfolio to US and European stocks. Triple portfolio: One third Indian equities, one third US small/mid cap, one third gold balances growth and risk. Targeted opportunities: Healthcare, top private banks and consumer driven sectors continue to show strong potential. Gold as a hedge: Keep portfolio resilient but wait for price corrections before increasing allocation. Domestic challenges: Be wary of the slowdown in white-collar jobs in India; it slows down consumption and corporate earnings. How do you see returns from here? Should investors moderate expectations, brace for a boom, or focus on realistic compounding? It depends on the market. As a global investor, a diversified portfolio across India, US and gold can still deliver double digit dollar returns over the next 3–4 years. But if you only stick to India, which is just 3% of the global market cap, the next few years could be tough. Earnings growth looks weak, and the labor market is rebalancing in India. The traditional white-collar employment model is fading, and India is transitioning to a professional gig economy, enabled by low-cost broadband, UPI and GST. During this transition, earnings growth and stock market returns may remain subdued, but this is not a problem if you diversify globally. The traditional white-collar employment model is fading, and India is transitioning to a professional gig economy. Do you think trade tensions with the US could potentially slow earnings growth? I do think India and the US will eventually reach an FTA (free trade agreement) but until then the 50% tariffs imposed by the US are hurting workers. I have seen the impact firsthand in Tirupur and Eastern UP (Uttar Pradesh)—textiles, handmade carpets, gems and jewellery, leather, jute and sports goods are all being disrupted, affecting 20–30 million workers. Unless relief comes by November, these tariffs could lead to job losses and decrease consumption. The government’s consumption stimulus may kick in over the next 3–6 months, but a large part may be offset by the tariffs. Are there any sectors or opportunities where you find fresh ideas? Or are you mainly adding to the winners already in your portfolio? We have been actively investing in home healthcare for the past 7–8 years and continue to find opportunities there. With the Ayushman Bharat scheme (public health insurance) and employer-provided Medicare, most healthcare will be delivered by the private sector, favoring hospitals, diagnostics, medical devices and pharmaceuticals. The second focus is on the top three banks—HDFC, ICICI and SBI. The banking sector is likely to become a three-horse race, with others fading. Non-performing assets may rise elsewhere due to white-collar job losses, but these three banks should perform well and make up 30% of the index. We have invested in HDFC Bank and ICICI Bank in various portfolios. We have been actively investing in home healthcare for the past 7–8 years and continue to find opportunities there. The third area is consumption, encouraged by a government stimulus of about $80 billion (1.7% of GDP) over the next 3–4 quarters, favoring FMCG (fast moving consumer goods), automobiles and consumer durables. Conversely, government capital spending will remain weak due to falling tax collections and fiscal recalibration, pressure on inventories linked to PSUs (public sector enterprises, or state-owned companies), contractors, defence, railways and road builders. In light of the US tariffs, you keep Carysil and about 27% of the company’s revenue comes from the US. Are you reducing or increasing your exposure to Carysil? Carysil (a Mumbai-based manufacturer of kitchen sinks) has done very well for us, doubling in the last 12 months. About 25–30% of its revenue comes from US exports, mainly quartz sinks, which are of high quality but 30–40% cheaper than German competitors such as Schock. Global retailers such as Ikea and the American company Karan source from them. We bought [shares in] Carysil two years ago, and while domestic consumption looks strong, the US tariff situation is worrying. Given the high valuations and inventory run-up, we have reduced our position over the past month. Looking at the bigger picture, do you think the Indian market is currently ahead of its fundamentals? Yes, this is typical. After 2020–21, people started investing a lot after the lockdown. Even as the economy slowed two years ago, mutual fund inflows remained strong at $30–40 billion a year, creating a disconnect between high valuations and weak fundamentals. Retail participation is also at a record high. Any mistake you will admit; a stock you’ve had your eye on but couldn’t get into? We missed the outsourced manufacturing space. We’ve watched Dixon Technologies with admiration for years, but never managed to get in. It’s a solid company—one that I wish we had noticed earlier. In my opinion, the outsourced electronics industry today is where outsourced pharmaceutical pharma was 20–25 years ago. Get all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download the Mint News app to get daily market updates. more topics #markets premium Read next story