Investors watching the market’s next move may want to look at quality-focused smart beta strategies now. Chintan Haria, Principal – Investment Strategy at ICICI Prudential Mutual Fund, believes the signals are lining up.
“Quality tends to stand out when the macro environment is shaky, valuations look stretched, or earnings visibility is uncertain,” Haria says.
He explains that when markets turn cautious, investors hunt for fundamentally sound companies—those with strong balance sheets, high return on equity (ROE), low debt, and steady earnings.
What’s triggering the shift?
Persistent inflation, tighter global rates, or weaker earnings in cyclical sectors often push money into quality stocks. Haria points out that during big events like the COVID-19 selloff or the Taper Tantrum—when the US Fed’s 2013 plan to cut bond purchases spooked global markets—quality indices such as the Nifty200 Quality 30 showed stronger downside protection than broader benchmarks.
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“Value and momentum styles have done well recently, but there are early signs that the cycle could be turning in favour of quality now,” he says.
Why quality can be a good bet now?
Quality is usually a late-cycle outperformer. As some market segments look overpriced, investors prefer companies that can deliver steady performance and withstand shocks.
Haria says the long-term numbers back this up. The Nifty200 Quality 30 Index has shown a healthy return-to-risk profile over rolling five- and ten-year periods.
How to Invest: A passive route
For retail investors, a simple way to add quality exposure is through passive products. Haria points to the ICICI Prudential Nifty200 Quality 30 Index Fund, which tracks the top 30 quality stocks from the Nifty 200 universe.
The index uses a clear formula. It picks companies with high ROE, low debt-to-equity, and stable earnings.
What makes this index fund stand out?
According to Haria, the fund gives investors:
- Access to financially strong companies that can protect portfolios during drawdowns.
- A return-to-risk ratio better than the Nifty50 and Nifty200 over multiple periods.
- Built-in diversification through semi-annual rebalancing.
- A low expense ratio as a passive product, with SIP, STP, and SWP options for flexibility.
How much to allocate and for how long?
Haria advises that quality should be a core part of a long-term portfolio. He suggests an allocation of around 10–15% of an equity portfolio to smart beta strategies like the Nifty200 Quality 30 Index Fund.
Investors can stagger investments over the next two to three years and hold for at least five years to get the full benefit.
“It’s not about beating the market every month,” Haria says. “It’s about steady compounding and protecting capital when things get rough.”
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