BlackRock, Inc.

New York Stock Exchange
Back to all articles
Somewhat Bearish -25

Jio BlackRock’s Rishi Kohli says earnings recovery delayed by West Asia conflict

AI-generated analysis

📉 Jio BlackRock's CIO Rishi Kohli states that the West Asia conflict has delayed India's corporate earnings recovery by one to two quarters.

🌍 The firm believes that combining stock selection, sector allocation, and factor investing creates three complementary sources of alpha for portfolios.

📊 Their FlexiCap approach is benchmark-aware, operating within a defined band around a stock's weight in the Nifty 500 rather than making aggressive sector calls.

🎯 The strategy aims to generate stock-specific alpha while keeping alpha volatility low compared to many peers in the category.

📉 Traditional factor signals like value and momentum have struggled recently, whereas sentiment-driven alternative data sources have performed well.

⚖️ A multi-signal approach is preferred over aggressive rotation between factors to avoid taking higher active risk.

💻 Jio BlackRock follows a digital-first distribution strategy that initially focused on SIFs before expanding to other products and retail investors.

📈 The firm expects earnings momentum to return over the next couple of quarters, which should allow markets to move onto a smoother path.

⚠️ Macro risks such as the ongoing war and fluctuating oil prices remain top of mind for the investment team.

💡 For salaried professionals with moderate risk appetite, the firm suggests curated combinations of three to five funds packaged by risk profile.

Bullish Signals
  • Jio BlackRock's multi-signal approach combining stock selection, sector allocation, and factor investing is designed to improve portfolio resilience against volatility.
  • The FlexiCap fund has demonstrated controlled alpha volatility during its live period, performing relatively well compared with many peers in the category.
  • Sentiment-driven alternative data signals have performed relatively well, providing a robust source of alpha alongside traditional metrics.
  • Management maintains confidence that earnings momentum will return over the next couple of quarters, signaling an expected path to smoother market conditions once the delay passes.
  • The firm's digital-first distribution strategy is planned to extend beyond SIFs to other products as they mature, indicating long-term growth potential in their business model.
  • Jio BlackRock believes diversification within equities strategies through stock alpha, sector alpha, and factor alpha offers a robust path forward for investors.
  • The systematic active equity approach aims to keep alpha volatility contained while improving the information ratio, a key metric for excess returns over a benchmark.
Risk Factors
  • Jio BlackRock's CIO Rishi Kohli warns that the earnings recovery cycle has been delayed by one to two quarters due to the West Asia conflict.
  • Traditional investment signals such as value and momentum have struggled in recent market volatility, with momentum specifically performing poorly over the last 1.5 years.
  • The firm acknowledges that aggressive sector rotation strategies involving active bets between factors like momentum and value inherently involve taking higher active risk.
  • Sentiment-driven data signals are currently moving in different directions, creating a tricky environment for portfolio construction.
  • The shift from a direct-to-digital-first distribution approach to incorporating distributors is a planned move but implies the initial digital-only strategy may have had gaps that required correction.
  • Macro risks including ongoing war and rising oil prices remain top of mind and could further impact market stability in the near term.
Full Analysis
Jio BlackRock's Chief Investment Officer Rishi Kohli states that the anticipated earnings recovery cycle in India has been delayed by one to two quarters due to the ongoing conflict in West Asia, which is impacting oil prices and broader market sentiment. While the firm expects earnings momentum to return over the next couple of quarters once the macro environment stabilizes, they are currently navigating volatility by combining stock selection, sector allocation, and factor investing strategies to improve portfolio resilience. The firm's FlexiCap approach operates within a defined band around benchmark weights for stocks like banking and IT, aiming to generate stock-specific alpha rather than making aggressive sector calls, with a focus on keeping alpha volatility controlled. Regarding investment factors, sentiment-driven signals have performed well recently while traditional value and momentum strategies have struggled over the last 18 months, reinforcing the need for a multi-signal approach that avoids high active risk associated with aggressive factor rotation. Additionally, Jio BlackRock is executing a planned shift in distribution strategy from a direct digital-first model to incorporating intermediaries like SIFs for more sophisticated products, while continuing to test alternative data sources and sentiment signals within their models.