Gold and Hedging Strategy Delivers Gains During Market Selloff
January 2026 proved to be a challenging month for Indian equity investors, with the benchmark Nifty50 index falling by approximately 3%. However, one portfolio management service (PMS) strategy managed to not only protect capital but also deliver significant positive returns during the downturn. Qode Advisors’ QAW strategy posted a gain of nearly 7%, showcasing a stark divergence from the broader market’s performance.
A Dual-Pronged Defense Against Volatility
Fund Manager Rishabh Nahar attributes this outperformance to a deliberate and proactive two-part strategy. The first component was a strategic increase in allocation to gold. The second was the use of dynamic hedging through derivative instruments. Together, these moves cushioned the portfolio against the equity market selloff and generated what is known as “alpha,” or returns above the market benchmark.
Gold has historically served as a safe-haven asset during times of economic uncertainty or market stress. When investor sentiment sours on riskier assets like stocks, capital often flows into gold, supporting or increasing its price. By raising the portfolio’s exposure to gold ahead of or during the January decline, the strategy benefited from this inverse relationship.
The Mechanics of an “All Weather” Approach
Rishabh Nahar describes the QAW strategy’s philosophy as an “all weather” approach. This means the primary goal is not necessarily to beat a raging bull market by the widest margin, but to prioritize stability and deliver more consistent returns across different market cycles. The focus is on managing downside risk during periods of decline, which can significantly improve long-term compounded returns.
The dynamic hedging element is key to this. Instead of a static, always-on hedge, the team actively manages its derivative positions. This involves using instruments like options or futures to offset potential losses in the equity portion of the portfolio. The “dynamic” nature allows the managers to adjust the level and type of protection based on current market valuations, volatility readings, and macroeconomic signals.
This tactical flexibility is what differentiates such strategies from simple asset allocation. It moves beyond just holding a mix of stocks and bonds, adding an active layer of risk management that can be dialed up or down as conditions change.
Context for Cautious Investors
This recent performance comes at a time when global markets are facing multiple sources of uncertainty. Factors such as geopolitical tensions, shifting central bank policies, and varying economic growth trajectories across regions have increased market volatility. For investors, this environment underscores the value of strategies that explicitly plan for drawdowns.
The success of Qode’s strategy in January serves as a practical case study. It demonstrates how alternative allocations and active hedging can work in tandem. While not all strategies will employ the same tactics, the core lesson for investors is the importance of understanding how their investments are positioned to handle market stress. A strategy’s performance in a down month can be as revealing, if not more so, than its performance during a rally.
For general investors, this highlights a broader trend in wealth management. There is a growing emphasis on outcome-oriented investing, where minimizing large losses is a critical component of achieving long-term financial goals. As markets evolve, strategies that blend traditional assets with tactical defensive tools are likely to remain in focus for those seeking smoother investment journeys.
