Pune: Amid rising global uncertainty and market fluctuations, Mahesh Patil, CIO of Aditya Birla Sun Life AMC emphasized the need for a balanced investment approach that combines large-cap and asset allocation funds to manage volatility and optimize returns.
The global economic environment remains challenging, with the U.S. Federal Reserve maintaining a cautious stance on interest rates. While potential rate cuts in 2025 could improve monetary conditions, the strength of the U.S. dollar continues to impact emerging markets, including India.
Domestically, India’s economic growth slowed in early FY25 due to fiscal contraction and tight liquidity but is projected to recover to 6.5% by FY26. Corporate earnings, which remain moderate in FY25, are expected to stabilize in FY26, supported by improving macroeconomic conditions.
Key Investment Trends: Market Correction and Recovery Signals
Technical Analysis: The recent market correction has led to significant rebalancing, with nearly 50% of NSE 500 stocks falling over 30% from their peaks. Sentiment indicators suggest that markets are approaching oversold levels, potentially paving the way for a rebound.
Liquidity Trends: Foreign Institutional Investor (FII) outflows remain broad-based across emerging markets, rather than being India-specific. However, with India’s FPI positioning at a decade low, further outflows are unlikely. Domestic SIP flows remain stable, though lump-sum investments have shifted toward low-volatility equity funds.
Policy Drivers: Budget and RBI’s Role in Economic Growth
Budget 2025: The ₹1 lakh crore personal income tax relief is set to boost middle-class spending, benefiting consumer-driven sectors and private banks.
RBI’s Monetary Policy: A 25-basis-point rate cut signals a pro-growth shift, with further cuts expected in 2025. Easing liquidity conditions are likely to provide a supportive backdrop for equities.
Investment Strategy: Managing Risk While Seizing Opportunities
Despite ongoing market volatility, the long-term fundamentals of the Indian economy remain strong.
Equity Strategy: Investors should consider large-cap and flexi-cap funds for their relative valuation comfort. Key sectors include banking, financial services, digital businesses, and consumer-driven industries.
Fixed Income and Commodities: With an 8-9% return expectation for fixed income investments, this asset class remains an attractive option for conservative investors. Additionally, gold and silver could offer 8-12% returns, serving as a hedge against global economic uncertainty.
Diversification Approach: A balanced mix of large-cap equities, multi-asset funds, and balanced advantage funds can help mitigate short-term risks while ensuring long-term wealth creation.
Market Corrections: A Buying Opportunity for Investors
Patil highlights that market downturns present opportunities to accumulate high-quality assets at favorable valuations. Investors should take advantage of current corrections to gradually deploy capital while maintaining a long-term, strategic perspective.
