- Broad equity cuts may sabotage long‑term gains; selective exposure is the new rule.
- Alternatives like private credit, infrastructure, and gold can cut portfolio volatility.
- India’s banking, infrastructure, and capital‑goods sectors are poised for multi‑year upside.
- AI exposure is safest through large‑cap adapters, not pure‑play tech stocks.
- DBS’s “Barbell Strategy” blends growth‑centric equities with income‑generating assets for resilience.
You’re overlooking the smartest way to shield your portfolio from today’s geopolitical storms.
Why DBS’s Call for Measured Equity Exposure Beats a Panic Sell‑off
Geopolitical risk remains a headline‑maker, but Joanne Goh, senior investment strategist at DBS, argues that a wholesale retreat from equities is a mistake. Policy uncertainty—trade tariffs, shifting industrial agendas, and diplomatic tensions—creates short‑term turbulence, yet it also fuels secular trends that favour domestically‑oriented firms. In an environment where fiscal stimulus is increasingly decisive, sectors anchored in India’s own growth engine—such as infrastructure, capital goods, and banks—stand to benefit from government spending and balance‑sheet support.
How Alternative Assets Reduce Correlation and Dampen Volatility
Correlation measures how closely two asset classes move together. When equity markets wobble, assets with low correlation—private equity, private credit, infrastructure funds, real assets like gold, and select hedge‑fund strategies—can act as a shock absorber. Private credit offers steady, covenant‑protected yields, while infrastructure projects generate long‑term cash flows that are less sensitive to global cycles. Gold, the classic safe‑haven, historically rises when risk appetite wanes, providing a tactical hedge without sacrificing upside.
Sector Deep‑Dive: Indian Banking’s Structural Edge
India’s banks are emerging as a cornerstone of the equity allocation. Asset quality has improved, credit costs are manageable, and capital adequacy ratios remain robust. Large private‑sector banks enjoy a diversified loan book—retail, MSMEs, infrastructure, and manufacturing—aligned with the country’s investment‑led growth narrative. Because their earnings are more insulated from external shocks, they deliver a higher risk‑adjusted return profile compared with many export‑dependent peers.
Infrastructure & Manufacturing: Multi‑Year Growth Catalysts
Government initiatives—Make in India, production‑linked incentives (PLIs), and sustained public capex—are reshaping the country’s supply‑chain landscape. Roads, rail, ports, power, defense, and digital infrastructure projects are set to receive billions of rupees in funding over the next five years. This creates a fertile runway for developers, cement producers, engineering firms, and capital‑goods manufacturers. The sector’s exposure to global demand cycles is muted, offering a defensive tilt for investors seeking stability amid external headwinds.
AI Adoption: The Better Way to Ride the Wave
AI is no longer a buzzword; it’s an efficiency engine across industries. Rather than chasing pure‑play AI stocks, Goh recommends targeting “adapters”—large‑cap companies that embed AI to boost productivity and margins. These firms possess deep data reservoirs and capital to scale AI implementations, widening the productivity gap between them and smaller competitors. Sectors such as cloud services, cybersecurity, and data analytics within the Indian IT space are prime examples, where AI augments rather than disrupts existing business models.
DBS’s Barbell Strategy: Marrying Growth and Income
The barbell approach splits the portfolio into two extremes: high‑growth, secular‑trend equities on one side, and steady‑income assets on the other. Growth picks include AI‑enabled IT services, capital‑goods firms benefiting from domestic demand, and banks with strong balance sheets. Income generators span high‑quality bonds, dividend‑rich equities, and REITs, all of which provide cash flow during market drawdowns. The combination aims to capture upside while smoothing volatility.
Investor Playbook: Bull vs. Bear Cases
Bull Case: If fiscal policy intensifies, public capex accelerates, and AI adoption proceeds as expected, equities in infrastructure, banking, and capital goods could outpace broader market returns. Alternates will further buffer volatility, leading to superior risk‑adjusted performance.
Bear Case: A sudden escalation in geopolitical tension could trigger capital flight, compressing valuations across risk assets. In this scenario, heavy reliance on alternatives—especially gold and high‑quality bonds—becomes essential to preserve capital.
Ultimately, the message is clear: don’t abandon equities, but diversify intelligently. By weaving together low‑correlation alternatives, sector‑specific growth bets, and income‑focused holdings, investors can build a portfolio that thrives in both risk‑on and risk‑off environments.