Market Surge and RBI Forecast Boost: Experts Suggest Equities Dominate Investment Portfolios

Today’s market saw a significant increase, with indices rising by nearly 2 percent. This surge coincided with the Reserve Bank of India’s positive revision of the FY25 GDP growth forecast to 7.2 percent, up from the previous 7 percent. The central bank also kept the repo rate steady at 6.5 percent for the eighth time, signaling stability.

The recent 6 percent market drop in a single day has worried many retail investors, especially those with less experience. To protect against such swings, experts suggest a diversified portfolio with gold, fixed income, and stocks.

Despite the market turmoil from the election results, most experts remain bullish on stocks, highlighting their potential for strong returns. They recommend allocating over 50 percent of one’s portfolio to stocks, with the rest in gold and fixed income. This balanced approach aims to reduce risks and maximize returns amid market volatility.

Let’s see what experts advise: Shashank Pal, Chief Business Officer, PL Wealth Management

Indians often favor gold for its ability to protect against inflation and for emotional reasons. Fixed income and bank deposits are also popular, but they may not always beat inflation and could carry risks. Given the current economic situation, an ideal allocation could be 5–10 percent in gold, 15-25 percent in fixed income, and 65-80 percent in stocks. It’s advisable to invest in stocks gradually over the long term.

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Stock markets are currently priced optimistically. Although the NDA won a third term, coalition politics could lead investors to focus more on large caps than mid- and small caps. Gold has historically performed well, especially during certain months. With favorable macroeconomic conditions, a 25 percent allocation to gold and short-term or medium-maturity bills could be wise.

Expert Insights

Rahul Ghose, CEO of Hedged.in, advises allocating 50 percent to equity and options structures, with long-term hedges for the next 6-9 months. He believes FY25 might not be as strong as FY24 but emphasizes that the long-term story remains intact. Ghose recommends diversifying the remaining 35 percent into a mix of gold, silver, and debt instruments.

Deepak Jasani, Head of Retail Research at HDFC Securities, suggests a portfolio allocation of 10 percent in gold, 35 percent in fixed income, and 55 percent in equities for investors aged 40-45 with medium risk appetite. However, for long-term investment, he recommends a 10:30:60 allocation for the same demographic.

Chirag Muni, Executive Director at Anand Rathi Wealth Limited, advises diversifying investments across asset classes with an 80:20 allocation to equity and debt, respectively. He suggests limiting gold investment to 5-10 percent of the overall portfolio, preferably through sovereign gold bonds (SGBs). For short-term investments, Muni recommends debt funds.

Vaibhav Jain, Head of Content & Education at Share.Market, stresses the importance of asset allocation based on individual risk profiles and goals. He recommends a 50-60 percent allocation to equities, 20-30 percent to fixed income, and 5-10 percent to gold for medium-risk investors with a 10-15 year horizon.

Yogesh Kalwani, Head of Investments at InCred Wealth, suggests a balanced portfolio with 50 percent in equity, 30 percent in fixed income, 15 percent in alternate investments, and 5 percent in gold for investors with a balanced risk profile. He highlights the importance of fixed income investments for portfolio stability.

In summary, amidst changing market conditions, experts advise maintaining a balanced portfolio allocation. While equities remain essential, diversification into gold and fixed income is recommended for wealth preservation and growth. Individuals should tailor their allocations to their risk profiles and investment horizons, leveraging strategic and tactical asset allocation strategies.