30 Under 30 2025

Forbes India's 2025 Investment Special: Rebalance your portfolio, not your strategy

While the new year will test the patience and nimbleness of most investors in their quest to improve returns, there are just too many moving pieces to consider

Salil Panchal
Published: Jan 16, 2025 11:47:36 AM IST
Updated: Jan 16, 2025 11:57:30 AM IST

Investors need to face this challenge in 2025. Globally, uncertainty over tariff restrictions with the coming of US President-elect Donald Trump and military conflicts across the globe does not paint a pretty picture.
Photo Imaging: Chaitanya Dinesh SurpurInvestors need to face this challenge in 2025. Globally, uncertainty over tariff restrictions with the coming of US President-elect Donald Trump and military conflicts across the globe does not paint a pretty picture. Photo Imaging: Chaitanya Dinesh Surpur

Too many moving pieces make it difficult for decision making and conviction to succeed. Investors need to face this challenge in 2025. Globally, uncertainty over tariff restrictions with the coming of US President-elect Donald Trump and military conflicts across the globe does not paint a pretty picture. It could mean fragmented global trade and staggered capital flows towards emerging markets.

Locally, high frequency indicators are worrisome, with GST collections in December slower than previous months and manufacturing PMI at a 12-month-low. India’s Q2FY25 GDP at 5.4 percent was the slowest in seven quarters and non-bank credit growth was at 11.8 percent for the fortnight ended November 29, 2024.

This data has reflected in investor and equities sentiment. In 2024, the Sensex was almost a tale of two halves, where after strong returns till August, the markets went into a time-wise correction, losing 9 percent from near-86,000 points in September, closing just 8.7 percent in the year. Large caps were the better bets, while mid- and small caps lagged. The primary markets saw sharp gains in 2024, where investor appetite towards mid-sized companies was higher.

India’s private final consumption expenditure (PFCE) grew at 4 percent in FY24, down 280 basis points from a year ago. Concerns over job security, stagnating incomes, rising inflation and an erratic monsoon in 2023, hit urban and rural household incomes.

But there is no reason for economic activity to not pick up, assuming that monetary and fiscal policy remains appropriate. As long as construction activity remains robust and houses are built and supplied, demand for goods, paints, consumer durables and electricals will all sustain. 

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Also read: Will 2025 be a reality check for stock markets in India?

Raamdeo Agrawal, chairman and co-founder, Motilal Oswal Financial Services, who in December completed his 29th Annual Wealth Creation Study, continues to be bullish on equities and a bull run, even if a time-wise correction could continue. “The easiest way of making money is by tracking the bruised blue chip, where momentum has lagged,” he says. Consumption demand will pick up sooner than later, he adds.

Investors who might still not be convinced about returns from listed equities, should not ignore investments in bonds. With double-digit returns in 2024 and relative safety on investments, this should be considered. 

The same is the case for REITs, where Indian REITs and InvITs raised investments worth ₹17,116 crore in FY24 compared to ₹1,166 crore in FY23. AIFs, both through private and public alternatives, offer institutions and individuals better returns than traditional deposits, but face the risk of higher illiquidity.

We have seen that gold, both in the pure metal form and ETFs gave solid, 20 percent, returns in 2024 but experts say the sheen may fade a bit in 2025. Central bank purchases of gold are likely to slow down, as will local demand.  

The trick, then, is to rebalance one’s portfolio, not strategy. Base it on your risk profile and if one asset class is starting to underperform, investors should be nimble enough to quit it and get onto another asset class with better opportunities.

(This story appears in the 24 January, 2025 issue of Forbes India. To visit our Archives, click here.)

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