Diversified Investment Strategy Key to Navigating Market Volatility: Mahesh Patil

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.
Mahesh Patil
Mahesh PatilSalil Urunkar
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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.

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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.

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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.

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