Puneet Sharma, CEO and Fund Manager at Whitespace Alpha, CAT3 AIF, believes volatile markets creates larger trading opportunities as the range of price movement expands.
“Whether markets go up or down becomes secondary. The focus is on how wide the move is and how efficiently we can capture it through derivatives,” Sharma said in an interview with Mint.
He points out that the consumption sector remains a strong long-term theme in India due to income growth and structural demand, while the IT sector may remain under pressure for some more time. Edited excerpts:
Is it possible to design an all-weather portfolio amid persistent geopolitical uncertainty?
An all-weather portfolio today is less about prediction and more about resilience by design.
Markets are increasingly driven by macro shocks such as geopolitics, interest rates, and liquidity cycles, so relying purely on directional equity exposure is no longer sufficient.
The structure needs three layers. First, a core allocation to long-term growth assets, such as Nifty-linked equities.
Second, a stable fixed-income component, which provides balance and predictability; this is where a well-constructed debt strategy becomes critical.
And third, a market-neutral derivatives overlay, which generates alpha independent of market direction.
At Whitespace Alpha, we combine equity exposure, high-quality debt instruments, and derivative-based strategies to create a portfolio that doesn’t rely on market direction to perform.
The idea is to participate in growth, protect on the downside, and generate consistent alpha through structure.
With India VIX cooling and Q4 earnings driving stock-specific moves, how does a derivatives-based market-neutral strategy capitalize on such environments?
I wouldn’t call this a low-volatility environment yet, VIX is still around 18, which indicates that uncertainty is very much present. In fact, higher volatility often works in our favour.
When markets are volatile, the range of price movement expands, and that creates larger trading opportunities.
Earnings season further amplifies this by driving stock-specific dislocations, where reactions are often sharper than fundamentals justify. Our strategy is designed to capture these longer-term movements and inefficiencies, rather than taking a directional view.
Whether markets go up or down becomes secondary. The focus is on how wide the move is and how efficiently we can capture it through derivatives. So in many ways, higher volatility doesn’t hurt us. It expands the opportunity set.
With the US Fed likely on hold amid elevated inflation risks, does prolonged global policy uncertainty strengthen the case for market-neutral strategies?
It does, but with a caveat. A lot depends on oil prices. Oil remains a key variable because it directly feeds into inflation expectations, currency stability, and global liquidity. If oil stays elevated, central banks may remain cautious, which prolongs uncertainty across markets.
In such an environment, directional investing becomes difficult because markets tend to move in phases rather than trends.
That’s where market-neutral strategies become more relevant. They are built to generate alpha irrespective of macro direction.
So yes, policy uncertainty strengthens the case for these strategies, but oil is the variable that can tilt the entire equation.
Where is smart UHNI money flowing in India today, and how can a derivatives-driven AIF add value?
We are seeing a gradual shift in UHNI (ultra-high-net-worth individuals) portfolios. Real estate continues to be a large allocation, but it comes with its own cycles and volatility, often driven by liquidity and interest rate movements.
What investors are increasingly looking for is consistency. That’s where Category III AIFs, especially those with structured and market-neutral approaches, are gaining traction.
A derivatives-driven AIF like ours focuses on delivering smoother return profiles, with controlled drawdowns and consistent alpha generation. It doesn’t replace traditional assets but complements them by improving overall portfolio stability.
In simple terms, while real estate and equities go through cycles, strategies like ours aim to deliver a more stable compounding journey.
What lessons have you learned from running market-neutral strategies across multiple cycles?
The biggest lesson is that consistency in process matters far more than consistency in outcomes. Markets will always throw phases at you. Sharp rallies, sudden drawdowns, policy shocks, volatility spikes.
There will be months where performance doesn’t look great. But what we’ve learned over time is that if your core principles and execution framework are sound, those phases are temporary.
At our end, the focus has always been on disciplined, process-driven execution backed by strong risk management, rather than reacting to every market move.
That means not chasing trends, not over-adjusting in volatile periods, and staying aligned to a repeatable alpha-generation framework.
It’s perfectly acceptable to have a bad month, but if your process is intact, you should never have a bad long-term run.
That’s the real difference between trading outcomes and building a strategy.
Across cycles, this has reinforced one belief. Alpha is not about predicting markets, it’s about executing a robust system consistently, regardless of conditions.
Where do you see opportunities in India today? Can traditional sectors still create wealth?
We typically don’t take strong sectoral bets, because our strategy is designed to extract alpha from market inefficiencies rather than directional views.
That said, from a broader perspective, consumption remains a strong long-term theme in India, supported by income growth and structural demand.
On the other hand, IT is currently in a challenging phase and may remain under pressure until there is more clarity on global demand and tech spending. Interestingly, pharma looks underappreciated.
There is more potential in the sector than what current market positioning suggests, especially as global healthcare dynamics evolve.
While we don’t position portfolios by sector, we do recognise that underlying sectoral cycles continue to shape market opportunities.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
