Market Regime Changes to Low Volatility as Defensive Factors Outperform: PL Asset Management

Mumbai, September 27, 2024: PL Asset Management, the asset management arm of PL Capital- Prabhudas Lilladher, one of India’s most trusted financial services organisations, has released its latest ‘PMS Strategy Updates and Insights’ report.
According to the report, Quality and Low Volatility factors are currently outperforming Momentum, High Beta, and Value strategies in the market. In August, the Nifty 200 Quality 30 generated returns of 2.40%, while the Nifty Low-Volatility 50 delivered 1.73%, both exceeding the benchmark Nifty 50’s return of 1.14%.
In contrast, the Nifty Alpha 50, which represents the momentum factor, returned just 0.31%. Meanwhile, the Nifty 500 Value 50 saw a decline of 1.19%, and the Nifty High Beta fell by 4.29%.
Analysing these trends, PL Asset Management’s advanced quantitative models indicate a shift in the market regime toward Low Volatility, suggesting that less volatile securities are poised to perform well. This shift highlights that defensive factors and investment styles are currently outpacing more aggressive ones. Performance data from June and July hinted at a transition toward Quality and Low Volatility, which has now solidified as the regime shifted in August.

According to PL Asset Management’s proprietary quant models, broader equity markets are expensive but not highly overvalued, with 45% of stocks trading above their 3-year average price-to-book ratio. The Nifty 50’s trailing P/E of 23.2x is 5% above its 3-year average. In contrast, small-cap and mid-cap indices trade at trailing P/E ratios of 31.6x and 43.6x, with premiums of ~12% and ~30% over their 3- year averages.
Equities remain the favored asset class, with ~80% of stocks near their highs and the Nifty hitting new peaks in one-third of CY24 sessions, but PL Asset Management’s quant models indicate a global shift towards gold, which is gaining momentum.
Despite the unwinding of the Yen carry trade, which triggered a global market crash and a 2.5% decline in the Nifty 50 on August 5, the index swiftly rebounded, closing the month at new all-time highs. Investor sentiment remained positive, with the BSE market cap reaching record levels. Nifty Pharma and Healthcare were the best performing sectors in August, gaining 6.6% and 5.5%, signaling a shift to defensives.

AQUA Performance
The report also states that PL’s flagship AQUA PMS has achieved an impressive return of 64% since its June 2023 launch, against the benchmark BSE 500 TRI 40.1%. This indicates an outperformance of 24%. In August, AQUA shifted allocation towards large and mid-cap stocks, now representing ~75% of its portfolio.
AQUA’s portfolio has increased its allocation to non-cyclical sectors such as Healthcare, IT, Consumer Staples, and Consumer Discretionary, which now comprise approximately 70% of the total portfolio. This strategic shift positions AQUA to navigate market fluctuations with greater resilience.
AQUA is India’s pioneering style-adaptive and style-agnostic strategy, engineered for alpha generation across market cycles. In over a year since inception AQUA has exceeded the INR 450 crore AUM (Assets Under Management) mark and consistently ranks among India’s top-performing Flexicap PMS and mutual funds.
Performance snapshot:

Mr. Siddharth Vora, Head – Quant investment strategies & Fund Manager, PL Asset Management Executive Director, PL Capital- Prabhudas Lilladher said, “As per current market dynamics, we believe the strategy should be risk minimisation than return maximisation, which is why AQUA’s portfolio has become more defensive. AQUA’s success lies in its ability to adapt flexibly to changing market conditions, employing an unbiased, quantamental strategy for portfolio construction. This approach consistently delivers strong risk-adjusted performance through systematic processes.”
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About PL Capital (Prabhudas Lilladher Group):
PL Capital Group is one of India’s most trusted financial services providers. Powering financial growth for eight decades, it specialises in research-driven investment insights in the Indian capital markets. Its business is spread across 200+ cities in India, catering to institutions, corporates, family offices, HNIs, and retail clients in India and globally. PL has a network of 1100+ franchise partners, 1.6 lakh clients, 250+ corporate relationships, and an employee base of 500+. The Group offers a comprehensive range of financial products and services, such as Broking and Distribution, Institutional Equities, Wealth Management, Asset Management, Investment Banking and Securities Finance. PL was recognised as one of the Best Brands 2023 by ET NOW and one of the Best BFSI Brands in India 2022 and 2024 by The Economic Times. PL also won the 36th Jamnalal Bajaj Fair Business Practices Award 2024.