Foreign institutional investors’ consistent buying over the last eight trading sessions has made Indian equities more attractive, supported by improved valuations and a favourable risk-reward balance, says Sonam Srivastava, founder and CEO of Wright Research. She recommended investors exercise patience and caution against potential volatility arising from factors like inflation, banking crises and geopolitical tensions, while Deepak Jasani, head of retail research at HDFC Securities, recommended a “buying the dip” strategy. Both agreed on the appeal of sectors such as power, capital goods, pharma, BFSI and auto.

Time to become bullish on equities; top investment themes, allocation break-up to considerTNN
The April series has been kinder for stock market participants with benchmark indices S&P BSE Sensex and Nifty50 giving positive closing on 8 straight sessions. The valuations have also corrected significantly, making equity investments lucrative. Is it time to turn bullish on stocks or tread a path of caution?

“Valuations in the stock market have improved due to corrections in stock prices, making equities more attractive. Foreign Institutional Investors (FIIs) have also made a comeback, consistently buying over the last 8 trading sessions, further supporting the attractiveness of Indian equities. This surge in foreign investment is likely driven by the improved valuations and favorable risk-reward balance,” Sonam Srivastava, Founder and Chief Executive Officer at Wright Research, told ET Markets.

Srivastava advised investors to consider allocating funds to equities now, given the current exuberance cautioning against potential volatility. This volatility may arise from factors such as inflation, banking crises similar to those happening in March and ongoing geopolitical tensions, she said.

Meanwhile, Deepak Jasani, Head of Retail Research at HDFC Securities, recommended ‘buying the dip’ strategy. “Nifty has risen by 5.2% or 900 points from the recent lows. Fresh investors can wait for a dip/higher bottom formation before starting to commit new funds. Traders will keep getting opportunities on both sides,” said Jasani.

Investment Themes
Investors should consider allocating their investments across various sectors and styles, focusing on value and being mindful of the comeback in momentum. Investors can look into factor baskets such as value, growth, and momentum to diversify their portfolio, suggested Srivastava.

“Tailor your allocations based on individual risk tolerance, financial objectives, and prevailing market conditions to maximize potential returns and safeguard your portfolio,” she added.

Jasani of HDFC Securities spelt out his preferred investment themes. “Power, capital goods, Pharma, BFSI could do well on a broad base analysis although stock specific opportunities will keep throwing up in other sectors as well,” the HDFC Securities analyst added.

Asset Allocation Break-up: Sonam Srivastava’s Picks
As an example, Srivastava said if an investor has Rs 1 lakh to pump into equities for this financial year, attractive sectors in which they could include infrastructure, telecom, power utilities, realty, and IT.

– Allocate 30% to momentum stocks, which have the potential to make a strong comeback as market dynamics shift.

– Maintain 20% in Value stocks, which performed well last year and may continue to dominate due to their attractive valuations and growth potential.

– Invest 20% in New India stocks, which are poised to benefit from government spending and infrastructure development, offering exposure to up-and-coming industries.

– Allocate the remaining 30% to a Balanced Portfolio, which includes a tactical mix of bonds and gold, providing diversification and stability during periods of market volatility.

– Banking and auto sectors are also expected to post good numbers and should be sought after by investors, she further said.

“By maintaining a well-diversified portfolio and adopting a long-term investment horizon, investors can navigate the uncertainties in the market while taking advantage of the improving valuations and positive developments in the economy,” the Wright Research CEO said.

Deepak Jasani’s allocation break-up
Asset allocation will depend on the age and the risk profile of investors, this analyst said. On a broad basis, one can look to invest 50-60% in equity now, 30-35% in debt and about 5-10% in gold. This needs to be reviewed every half-year, taking into account the fresh data points.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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