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It’s not about predicting the next three-six months, but making decisions that shape wealth 5-10 years ahead, said Harish Krishnan, chief investment officer (CIO)–equity at Aditya Birla Sun Life AMC, who manages assets of around ₹2 trillion.

“A correction of this magnitude warrants more aggressive equity investing, depending on risk appetite, as a reasonable part of the market is now fairly valued or offering better value than six to nine months ago,” he said in an interview.

Krishnan is increasing exposure to three areas:

To fund these, the Aditya Birla Sun Life CIO is reducing exposure to auto companies and taking a cautious stance on investment-linked companies.

Edited excerpts:

If one parks the current volatility emanating from Middle East crisis, the market situation reflects a strong structural foundation built over the last 18 months. Equities represent part-ownership in a business, requiring a businessman's mindset. Before the conflict, India addressed five critical areas: boosting domestic demand via tax cuts, achieving currency and rating upgrades to lower the cost of capital, improving export competitiveness, stitching trade treaties with 70% of world economies, and benefiting from rate cuts. These factors create a positive long-term outlook within our control.

The Middle East conflict has caused collateral damage due to India’s dependence on external energy, impacting supply chains, and driving near-term volatility. However, just as a farmer doesn't lose a farm's value over one bad crop, a company's value resides in its terminal value over the next 20 to 50 quarters, not the next one or two. Rather than fretting over daily drops, investors should welcome corrections as opportunities to back businesses whose competitiveness remains strong or has even increased.

A correction of this magnitude warrants more aggressive equity investing, depending on risk appetite. This isn't about predicting the next three to six months, which is anyone's guess, but about making decisions that impact wealth five to ten years down the line. You should continue with your SIPs for the discipline of long-term wealth creation, as that should never be touched. However, now is the time to be slightly more aggressive…

A portfolio typically comprises 80-85% long-term holdings and 10-15% in a trading-oriented portion meant for the "here and now". Within that trading portion, we are seeing a significant shift. We (are) switching out of stocks where the recovery may take longer. We are making trade-offs, such as moving from a secondary player in one sector down 25% into a sector leader in another that has dropped 40% and offers better value.

We are increasing exposure to three broad areas. First, we are contrarian buyers of companies significantly impacted by high energy prices. While the next six months will be difficult due to volume impacts, we believe the world cannot sustain these elevated energy costs. Second, we are betting on domestic consumption. Third, we are buying financials; these… are significantly underpriced due to foreign selling despite no impact on near-term earnings.

To fund these moves, we are significantly pruning exposure to auto OEMs (original equipment manufacturers), which have already performed well following GST (goods and services tax) cuts.

Low-expectation areas are the best hunting grounds for identifying top-tier companies, as high-expectation sectors offer little edge. While we focused on the ignored macro 24 months ago, the pendulum has swung; macro is now a crowded field. We currently focus on the micro, backing management teams that do things differently with a view of 30–50 quarters rather than the next two.

We avoid wealth-creating sectors with high built-in expectations, like defence, and pivot to "hated" areas like Insurance or IT where people haven't made money recently. This "expectation investing" ignores daily market moves to find paranoid management teams in under-owned spaces. History shows wealth creation is evolutionary and polarized, with a tiny fraction of companies contributing half of the total market wealth while others destroy it.

I would say no to tactical weight. Ultimately, you are buying a part of a company, so why should it be tactical? You can certainly look at arbitrage or special situations, like a buyback or complex corporate restructuring, that might create value over six months. You might also slightly overweigh a sector (e.g., moving from 10% to 11%) if you believe it will perform well in the short term.

However, you shouldn't double an allocation from 10% to 20% based on a tactical call. That turns it into a trading-oriented portfolio. Churning with new ideas every month is not a sustainable framework, especially when managing large sums of money like ₹2 trillion or ₹5 trillion. While high turnover might work for a small fund of ₹2,000–5,000 crore, it’s like being on a treadmill.

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