 "Invest 35% of portfolio in multi-asset, equity savings funds, says Motilal")
Even though short-term market volatility is expected due to global uncertainties—such as geopolitical risks, central bank policies, and the ongoing impact of valuations—brokerage Motilal Oswal remains optimistic about the long-term outlook for equity markets as companies are expected to continue reducing their debt levels, and it has also forecast strong earnings growth for the next two years, with many firms poised to benefit from ongoing structural economic changes.
For investors, the advice is clear: stay invested in equities, especially those who have adequate exposure to the asset class. Investors who are under-allocated should look to gradually increase their equity allocation, with a structured, staggered approach. This will help smooth out volatility and capture returns as the market moves forward.
Fixed Income Portfolio Strategy: Diversification and Yield Enhancement
Motilal Oswal has the following advice for investors: Fixed income
30% of the fixed income portfolio may be allocated to actively managed duration funds to capitalize on evolving market conditions. For those looking for passive exposure, long-term G-sec (government securities) funds with maturities ranging from 15 to 30 years are recommended. These offer accrual income and potential market-to-market (MTM) gains.
Equity strategy:
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An additional 30% to 35% of the portfolio could be invested in multi-asset allocation funds or equity savings funds, which aim to provide enhanced returns through a combination of domestic equity, arbitrage, fixed income, international equity, and commodities like gold.
For investors looking to boost overall yields, MOPW suggests that 30% to 35% of the fixed income portion be allocated to Private Credit strategies, InvITs (Infrastructure Investment Trusts), and high-yield NCDs (Non-Convertible Debentures).
Floating rate funds (with investment horizons of 9-12 months) and arbitrage funds (with a 3-6 month investment horizon) can also be used to improve liquidity and provide more stable returns in an uncertain environment.
Gold Outlook: A Safe Haven Amid Volatility
As global uncertainties continue to impact the markets, gold remains an attractive option for investors looking to mitigate risk. MOPW notes that gold's value tends to rise in response to geopolitical instability and macroeconomic uncertainty. With the US elections recently concluded, there is potential for policy shifts that could influence the gold market. However, regardless of specific political changes, gold's role as a store of value and hedge against risk is expected to remain strong in the coming months.
Silver Outlook: Industrial Demand and Green Tech Growth
On the other hand, silver is projected to benefit from several key trends. According to MOFSL research, silver has a strong demand outlook, driven by:
- Increased industrial demand, especially in sectors like electronics and solar energy.
- A boost in manufacturing and industrial activity in countries like China.
- The potential for growth in green technologies, such as solar panels, where silver is a key component.
As a result, silver is expected to be a strong performer in the commodities space, offering both industrial utility and investment potential.
According to MOPW report, one must be cognizant of the fact that Equity market returns are not linear. Markets have witnessed intra-year drawdowns of 10% or more in 22 out of the last 25 years and investors should always be prepared for such sharp bouts of volatility. And the period of easy returns where rising tide lifted all boats is over.
What should investors do?
"MOPW reiterate its stance of focusing on “Fundamentals over Flavour” i.e. companies with strong businesses showing sustainable growth rather than chasing market trends. MOPW notes that post this correction, Large Caps valuations have come in the fair range almost at par with long term average, while Mid & Small caps on aggregate continue to remain relatively expensive."
It believes that after a strong rally over the last 2 years across market caps, future returns expectations should be moderated in line with earnings trajectory. Hence, MOPW suggests adopting a staggered investment approach over 3-6 months for Large cap & Multicap strategies. For select Mid Small cap strategies, investments should be staggered over the next 6-12 months. Equity oriented hybrid strategies can be considered for lump sum deployment, it said.