How should your portfolio be positioned in a risk-off environment? Rahul Singh answers

The market has been undergoing a time correction over the last 18 months following the deterioration of global macros due to rising interest rates, high inflation, slowing growth and volatile geopolitics.

Bajaj Allianz Life Insurance's Sampath Reddy, prefers value-oriented stocks over growth and expects the market valuation to peak between 19 to 20 times PE in the coming year. Although the market valuations are slightly high, the Indian macro economy is performing well in terms of GDP growth and benign inflation, driving higher valuations. Reddy notes the shift from growth to value-oriented, higher-interest rate-sensitive utility sectors and believes it will continue.

At a time when it is not possible to find stocks that can be called “fairly valued” and forget “undervalued”, but the sentiment continues to be bullish, it is tough for retail investors to control their desire to buy stocks. The fact is that this market has been in an overvalued zone for quite some time, but as they say, liquidity and sentiment can ensure that market remains in that zone for longer than anyone expects. So, for investors, it would be wise to take exposure to stocks, where a sector the overall market size is very big or the sector has reached an inflection point where the market size will grow or they have an income stream that has an element of annuity. The reason why this strategy works is that even if the valuations are expensive at the time of buying stocks, steady growth in the industry helps in normalizing the valuations of individual stocks.

“I do not think anybody is going to wait for the next six months outcome. People are going to rush in and start allocating their longer term bets now and that is what is going on when we talk to the foreign investors. Everybody is asking for new ideas, where they can deploy capital. Sometime back, the conversation was about how much to take off the table, how much cash to sit on but that has all gone in the air now.”

Today, we are growing our retail loans organically at 27%, which is faster than probably any private sector bank. We have also been able to attract talent from almost every bank, retain it, and also use it in terms of key functions to upgrade ourselves, says Sanjiv Chadha.

“If you have money which is needed after 10 years plus, then having a slightly higher equity, even to the extent of 80% equity would be good to have in the portfolio. So, look at your asset allocations; five to six years, 65 to 75% equity, if more than that, then you can have 80% equity.”

State elections can create short-term volatility, but the outcome of the General Elections 2024 is a key monitorable, says Dikshit Mittal, fund manager of LIC Mutual Fund.

Amit Goel predicts a global bear market, advises a multi-asset approach. He also warns of overvaluation in defensive sectors and discusses post-election sector performance. Goel further anticipates minimal crude oil impact on equity markets amid global rate cuts. Goel says: We would advise our investors to be extremely underweight in mod and smallcap segments and have a multi-asset approach in their portfolio

“We have done well in the Middle East market and parts of Africa which is Ethiopia; however, the overall market in Asia has been hit very strongly, especially markets of Nepal and Bangladesh. We feel that the global markets will be slow to recover and we are not seeing an immediate recovery in Q3 in terms of the global markets.”

“The domestic facing sectors have been currently doing much better especially the financials. The export-oriented sectors, especially IT, are still facing challenges in terms of overall growth. That is why the domestic facing sectors are much preferred. But within the exports, especially the pharmaceutical export, the generic pharmaceutical exports segment continues to do well. ”