Ihab Dalwai, Senior Fund Manager at ICICI Prudential Asset Management Company (AMC), argues for a flexible asset allocation approach in the Indian markets, which are currently trading near elevated long-term averages. He believes that relying on a static asset class poses higher risks, especially given the high return dispersion expected over the next three years. The Active Asset Allocator Long-Short strategy, which operates under the Specialized Investment Fund framework, offers increased flexibility by allowing a broader range of derivative-based strategies compared to traditional Balanced Advantage Funds. Dalwai highlights the importance of dynamically reallocating capital among equities, debt, and commodities based on macroeconomic indicators such as growth trends and inflation. He notes that while commodities, particularly precious metals, have performed well, their allocation should be tactical rather than structural. Additionally, midcaps are identified as having potential, especially in sectors linked to domestic economic formalization and government-led capital expenditure, although careful stock selection is crucial due to varying valuations.