Equity Markets Poised to Outperform Bullion, Says Samco MF CEO
In a recent interview, Viraj Gandhi, Chief Executive Officer at Samco Mutual Fund, shared insights on market trends, highlighting that while gold and silver may enter a sideways range after a historic rally, equities are set to outperform these commodities over the next two years. This analysis comes amid shifting global dynamics and the recent India-US trade deal announcement.
Foreign Flows Set to Reverse Post Trade Deal
Gandhi emphasized that foreign flows are most likely to reverse following the India-US trade deal announced on February 2, 2026. He noted that other global markets, such as the US, South Korea, and China, have already performed well and become expensive, making India a potentially attractive investment destination. "This may be considered the time to buy the India story," Gandhi stated, adding that foreign investors will be looking to capitalize on India's structural strength, despite previous premiums that led to selling by Foreign Institutional Investors (FIIs).
He explained that while India had become comparatively expensive after a rally from the COVID period until October 2024, the current scenario suggests a gradual reversal in FII flows. Domestic investors are performing well, and once foreign portfolio investment (FPI) flows resume, the market is expected to resume its upward trajectory.
Gold and Silver to Settle in a Range
Regarding precious metals, Gandhi pointed out that gold and silver recently saw corrections and are unlikely to match equity returns in the coming years. He cited a statistical rarity: a 20% rise in gold prices in a single month, last seen in 1971, followed by a significant fall. "Gold and silver have become such large economies in themselves that they might not move this fast," he remarked, suggesting that these assets may now trade within a range.
For silver, in particular, Gandhi highlighted industrial usage concerns. If raw material prices surge five to seven times in a year, manufacturers might seek alternatives, reducing demand. Investors are advised to consult financial advisors due to market volatility before making investment decisions.
Earnings Growth and Market Volatility
On earnings growth, Gandhi expressed optimism, noting that the earnings per share (EPS) of Indian companies are likely to accelerate, with growth rates projected in the higher double digits. This makes Indian markets more attractive on a relative valuation and growth basis for long-term investments.
Addressing market volatility, such as the 2% fall on budget day and a 5% rise post-trade deal announcement, Gandhi detailed Samco's hedging strategy. "We started hedging on budget day to protect downside, but cut all hedges two days later when markets bounced," he explained, illustrating how the fund adapts to rapid market movements.
Momentum Strategy Insights
Gandhi elaborated on Samco's momentum-based investment strategy, which relies on market direction—performing well in upward or downward trends but underperforming in sideways markets. Over the past year, with markets range-bound, momentum strategies faced challenges. For instance, from April 2025 to January 2026, high hedging costs and lack of direction led to underperformance.
He described the momentum scoring system, which uses Z scores based on 6-month and 12-month average returns divided by standard deviations. This algorithmic approach allows quick adjustments, though it results in high churn and costs, akin to a car insurance premium that proves valuable in crises. Gandhi recommended allocating only 10-15% of a portfolio to momentum strategies, especially for those with low risk tolerance, comparing it to a nitro engine that provides speed but shouldn't power the entire vehicle.
In summary, Gandhi's outlook underscores a shift towards equities over commodities, driven by foreign flow reversals and India's growing appeal, while cautioning investors to navigate volatility with strategic hedging and diversified allocations.
