Himanshu Kohli, Co-founder of Client Associates, suggests that allocating 10–25% of one’s portfolio to international markets can help enhance resilience, provide currency diversification, and capture opportunities across global economies.
He highlights that exchange-traded funds (ETFs) offer a cost-effective and efficient route to achieve this diversification across equities, bonds, gold, and global markets.
In an environment marked by shifting macro dynamics and commodity-led volatility, Kohli emphasizes that a disciplined asset allocation strategy—supported by ETFs and periodic rebalancing—can help investors navigate uncertainty while staying aligned with long-term financial goals. Edited Excerpts –
Q) Geopolitical tensions seem to be escalating across regions. How should global investors interpret these developments from a macro and market perspective?
A) From a macro perspective, markets are currently repricing growth risk amid geopolitical stress, leading to an increase in the risk premium. At the micro level, the focus should be on fundamentals, such as the balance sheets of different economies and companies. At this point, stock selection and balance sheet strength will matter much more than momentum narratives.In the context of the current geopolitical tensions, it is advisable not to get out of the market at this time. There could be some value buys available, and this is a good opportunity to accumulate positions. However, investors must be prepared for higher volatility and a longer time horizon.While there are views that suggest equities should be held for 3 to 5 years, we recommend an accumulation strategy for 6 months and holding investments for 5 years. Global investors should diversify their investments across asset classes, geographies, currencies, and markets.
Q) Historically, markets tend to react sharply to geopolitical shocks but recover quickly. Is it time to diversify globally and which markets are looking attractive?A) We have observed in the past, such as during the 2008 financial crisis, that after about 8 to 9 months of turmoil, things consolidated, and we experienced a V-shaped recovery. During the COVID-19 pandemic, we also saw a V-shaped recovery within a couple of months, followed by very bullish market trends.
However, this time presents a relatively new situation as energy and oil prices are significantly influencing the markets. It is also becoming difficult to predict whether this is a long-term or a short-term conflict We believe it’s only a matter of time before we see improvements.
In our view, it will take a few months for the situation to stabilize. The good thing about the current crisis is that overvaluation is getting corrected, while undervalued markets are becoming much cheaper. As a result, markets are becoming far more attractive.
It’s important to note that one should not wait for the absolute bottom to invest, as that is almost impossible to identify. Instead, one should focus on accumulating equities as per their asset allocation strategy.
Additionally, it definitely makes sense to diversify beyond just India, as putting all your eggs in one basket can be risky. In fact, there are opportunities in certain countries with strong energy sectors and oil resources worth exploring in the current scenario.
From a market perspective, the US markets, specifically the S&P 500 and NASDAQ, look promising after relative underperformance in the last 12-15 months, along with emerging markets such as India (represented by the Nifty 50), Brazil, China and Hong Kong.
Q) How could rising crude oil prices and commodity volatility reshape the global investment landscape?A) If the conflict persists for a longer period, the elevated crude oil prices and commodity volatility may lead to significant consequences, including higher inflation and higher interest rates. As interest rates rise, profitability may decline, impacting equity markets across the globe. In such a scenario, we can see a shift in market leadership from growth to value.
Countries that are major importers of oil and other commodities, like India, will be severely impacted. Hence, there will be higher volatility in Indian markets, and in this scenario, one should diversify beyond India if one wishes to participate in equities.
Additionally, diversifying into other asset classes, including gold and commodities, balanced funds, private credit, private equity, and international markets. can help reduce volatility. This approach may prove to be more effective at this time, and, more specifically, taking exposure to markets strong in energy and oil will make more sense right now.
Q) What role does rebalancing play during volatile periods when asset prices move sharply due to geopolitical shocks?A) Rebalancing is an efficient risk-mitigation technique that works particularly well in mean-reversion asset classes such as equities. When there is an asset allocation shift, rather than trying to predict market movements, one should react, and rebalancing is a reactive tool.
Hence, in times of chaos and confusion, when markets often behave smarter than individuals, it is advisable to take a more passive approach. However, the rebalancing model should remain active.
Now, if the market becomes undervalued, one should not hesitate to increase their investment. For example, suppose someone is a 50% equity investor, and in the last month, markets have fallen by 10%, then the equity allocation would have become 47%.
The rebalancing approach would advise returning to the original 50% allocation, which requires a 3% immediate adjustment. On the other hand, if the market is in an attractive valuation zone, then one should increase the equity allocation to 55%.
In this case, a reallocation strategy would suggest adding 8%. Therefore, we recommend increasing the allocation by 3% right away and then using a systematic investment plan (over 3 -6 months) to gradually increase the investment by the remaining 5%, allowing one to reach 55%.
Q) How can investors use ETFs to achieve better asset allocation across?A) ETFs offer great liquidity and are cost-effective investment tools. They are efficient tools for implementing asset allocation strategies and building diversified portfolios compared to actively managed stocks or funds. ETFs are widely available across geographies and can invest in equities, bonds, gold and international markets.
They are also capable of adapting to macroeconomic shifts and maintaining discipline during market shocks, making them highly efficient investment vehicles.
In some cases, ETFs can be mispriced, as in the case of gold ETFs, which were trading at a premium due to high demand and supply shortages. This situation led ETF holders to pay premiums. Nonetheless, ETFs still provide a lower-cost advantage.
For investors, instead of trying to determine which stocks to buy, they can opt for equity, bond, and international-market ETFs. Hence, we believe it makes more sense to use ETFs to create robust asset allocation models. Additionally, investors can consider some multi-asset allocation funds, as mathematical models operating behind the scenes can enhance investment strategies.
A multi-asset allocation fund manager will make decisions on equities, gold, silver, and other assets based on their proprietary models and this will help in timing the entry and exit with ease unlike ETFs.
Finally, investors can also look at global allocation funds launched under the GIFT City IFSC framework, taking exposure to ETFs spanning different markets and disruptive global themes.
Q) Which global ETF themes—such as technology, semiconductors, or global indices—do you believe investors should track in the current environment?A) The investor can have a core portfolio of broader-market ETFs from international markets and a satellite portfolio where tactical calls are made on a few themes. The core portfolio should be diversified and include broader indices, such as the S&P 500 or NASDAQ ETFs.
It might also be beneficial to include a broader exposure to markets such as Brazil, China and Hong Kong. We are positive on China on account of the policy measures, both in terms of monetary easing and fiscal support, while Brazil is a commodities powerhouse and will benefit significantly as commodity demand and prices climb.
On the other hand, Hong Kong provides exposure to China’s technology and consumer giants, many of which have improved profitability. Also, easing Chinese inflation and continued policy support should drive an upturn in corporate profit cycles in 2026, boosting confidence in HK-listed Chinese tech and industrial stocks.
For satellite investments, we could focus on themes such as energy, which could be a good addition at this time. We should also consider adding a defense-related theme and themes related to artificial intelligence (AI).
Q) Ideally what percentage of capital should be diversified globally for someone who is 30-40 years? And if someone wants to deploy fresh capital what would you advise?A) The percentage of capital to be diversified globally should be determined by one’s personal financial plan, based on how much of an HNI’s needs are met in Indian markets and how much comes from global markets.
For instance, if we think about children’s education, this represents an international need, especially if one plans to send their kids overseas for undergraduate or postgraduate studies. Additionally, holidays and global travel are also important objectives.
Therefore, it is essential to adopt a more bottom-up approach in developing their financial plans. For need-based wealth, we can identify needs and link them to financial goals; for surplus wealth, a guideline is to allocate 10% to 25% to international markets. It’s advisable to go beyond 25% if there is a possibility of family succession or if beneficiaries are based overseas.
If someone wants to deploy fresh capital, 75% to 90% should still be invested in India, while 10% to 25% can be allocated to international funds, focusing on developed and emerging markets such as the US (S&P 500, NASDAQ), Brazil, China and Hong Kong.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
