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What is the story about?
Indian equity markets are moving through a phase of consolidation marked by global uncertainty, uneven participation and cautious investor sentiment, according to a recent report by PL Asset Management.
In its latest PMS Strategy Updates and Insights note, the asset manager said equity indices have remained resilient largely due to gains in a limited set of large-cap stocks, while broader market participation has stayed weak. External headwinds have constrained near-term performance, even as domestic macroeconomic fundamentals remain structurally supportive.
The report highlighted persistently weak market breadth over the past year. A small proportion of stocks have consistently traded above long-term moving averages, indicating fragility beneath headline index levels.
PL Asset Management said this divergence suggests Indian equities are fundamentally sound but have yet to enter a durable, broad-based uptrend.
Style factor performance in 2025 reflected this selective market environment. Value and high-beta strategies delivered positive returns, while momentum strategies underperformed due to repeated trend reversals and fragmented leadership. Value stocks attracted investor interest on the back of relatively attractive valuations and earnings visibility, while high-beta gains pointed to measured risk-taking rather than a broad risk-on phase.
Against this backdrop, precious metals outperformed Indian equities during the period. Gold and silver benefited from sustained central bank demand, currency volatility and geopolitical uncertainty. Silver also drew support from its industrial usage amid supply constraints.
The firm noted that Indian equities are currently trading near multi-cycle relative lows when compared with gold and silver.
PL Asset Management said such valuation gaps between financial and real assets have historically coincided with periods when diversification helped investors manage volatility and preserve capital. The firm clarified that this trend does not indicate a structural shift away from equities but underscores the importance of balanced asset allocation during transitional market phases.
Market sentiment indicators tracked by the firm suggest pessimism may have eased. Internal risk and sentiment metrics point to gradual improvement, supported by stable domestic macro data and a better earnings outlook. The report also noted that the high–low beta spread turned positive toward the latter part of 2025, signalling early signs of returning risk appetite, though the recovery is expected to remain gradual.
Commenting on the outlook, Siddharth Vora, Head of Quant Investment Strategies and Fund Manager at PL Asset Management, said market outcomes are currently being driven more by asset allocation than by broad equity rallies. He added that gold and silver have continued to play a stabilising role during periods of equity consolidation.
Looking ahead, the firm expects Indian equities to benefit from a gradual recovery in earnings and potential global capital rotation as valuations in overseas markets normalise. However, it said diversified portfolios remain important until market breadth improves and volatility moderates.
PL Asset Management also noted that its AQUA (Adaptive Quantitative Unbiased Alpha) strategy showed relative resilience during the recent consolidation phase, marginally outperforming its benchmark in December amid weak market breadth.
In its latest PMS Strategy Updates and Insights note, the asset manager said equity indices have remained resilient largely due to gains in a limited set of large-cap stocks, while broader market participation has stayed weak. External headwinds have constrained near-term performance, even as domestic macroeconomic fundamentals remain structurally supportive.
The report highlighted persistently weak market breadth over the past year. A small proportion of stocks have consistently traded above long-term moving averages, indicating fragility beneath headline index levels.
PL Asset Management said this divergence suggests Indian equities are fundamentally sound but have yet to enter a durable, broad-based uptrend.
Style factor performance in 2025 reflected this selective market environment. Value and high-beta strategies delivered positive returns, while momentum strategies underperformed due to repeated trend reversals and fragmented leadership. Value stocks attracted investor interest on the back of relatively attractive valuations and earnings visibility, while high-beta gains pointed to measured risk-taking rather than a broad risk-on phase.
Against this backdrop, precious metals outperformed Indian equities during the period. Gold and silver benefited from sustained central bank demand, currency volatility and geopolitical uncertainty. Silver also drew support from its industrial usage amid supply constraints.
The firm noted that Indian equities are currently trading near multi-cycle relative lows when compared with gold and silver.
PL Asset Management said such valuation gaps between financial and real assets have historically coincided with periods when diversification helped investors manage volatility and preserve capital. The firm clarified that this trend does not indicate a structural shift away from equities but underscores the importance of balanced asset allocation during transitional market phases.
Market sentiment indicators tracked by the firm suggest pessimism may have eased. Internal risk and sentiment metrics point to gradual improvement, supported by stable domestic macro data and a better earnings outlook. The report also noted that the high–low beta spread turned positive toward the latter part of 2025, signalling early signs of returning risk appetite, though the recovery is expected to remain gradual.
Commenting on the outlook, Siddharth Vora, Head of Quant Investment Strategies and Fund Manager at PL Asset Management, said market outcomes are currently being driven more by asset allocation than by broad equity rallies. He added that gold and silver have continued to play a stabilising role during periods of equity consolidation.
Looking ahead, the firm expects Indian equities to benefit from a gradual recovery in earnings and potential global capital rotation as valuations in overseas markets normalise. However, it said diversified portfolios remain important until market breadth improves and volatility moderates.
PL Asset Management also noted that its AQUA (Adaptive Quantitative Unbiased Alpha) strategy showed relative resilience during the recent consolidation phase, marginally outperforming its benchmark in December amid weak market breadth.
