Samvat 2081: This is how you should rebalance your portfolio in the new year – expert advice | Stock Market News
Source: Live Mint
At the onset of Samvat 2080, the market outlook was generally positive, albeit with mixed sentiments due to global uncertainties and a robust domestic economy. There was a concern that maybe the domestic economy and FIIs inflows could go slow based on global factors. Heightened global tensions, driven by conflicts in Ukraine and Palestine, elevated inflation, and rising interest rates, added to the uncertainty.However, the performance of 2080 Samvat surpassed expectations. This is because the geopolitical risk become localised and the US economy surged much better than the consensus, not being affected by either inflation or interest rates.
We recommended that retail investors diversify their portfolios by investing in multiple asset classes, including equities, bonds, gold, and cash, to enhance diversification and mitigate risk. We believed that each of these categories offered strong investment opportunities also strengthen the portfolio in case of hike in volatility. At that time, the Indian economy was forecast to grow well based on reform and inherent local demand. Valuations were considered fair, neither overly expensive nor cheap, as the global market had corrected due to geopolitical tensions and rising yields. However, it was crucial to be selective about stocks and sectors, as some domestic areas were expensive and susceptible to global uncertainties. We favoured large caps. At that time, corporate bonds were generating a decent coupon rate of minimum 8% to 11.25% up to an A rating. Gold was also seen positively due to central bank demand, INR depreciation, Geo tense, high inflation, and slowdown in the global economy.
All these asset categories performed well. The broad market achieved a return of 30.7%, and gold returned 32.1%in Samvat 2080. The market exceeded forecasts due to strong domestic retail inflows, leading to a notable performance in mid and small-cap stocks, contrary to the expectation that large caps would outperform. Nifty100 provided a return of 28.2%, while Niftymidcap100 has provided 36.9%. After the initial setbacks, performance improved significantly following the national elections, driven by a rebound in retail inflows.
Samvat 2081
As we look ahead to Samvat 2081, our outlook remains largely unchanged from 2080. Expectations are modest after the strong return in both SAMVAT 2079 and Samvat 2080. Especially for Mid & Small caps, Niftymidcap100 and Niftysmlcap100 have provided 32.9 & 36.9% and 38.7% & 37.6%, respectively. The premium valuations of Midcap to Large cap are at an elevated level, and their earnings growth is contracting. We recommend continuing with a multi-asset strategy. We maintain a preference for large caps over mid-caps and remain positive on gold, driven by the anticipated reduction in interest rates in 2025, central bank diversification strategies, a global economic slowdown, and heightened geopolitical tensions.
We expect the start of the Samvat to be positive in the month of November in the aftermath of the October correction. However, the volatility is expected to continue in the initial quarters due to a sharp correction in corporate earnings and in anticipation of a contraction of India’s premium valuation.A clearer understanding of earnings growth for FY26 is expected to emerge in the December-January period. On a long-term basis, we expect India earnings growth to be stable at 12-15% leading to a positive outlook in the long-term.
Following the initial consolidation, we expect the market to improve due to a reduction in interest rates and a cut in global inflation, which can boost domestic future corporate earnings. We also anticipate that the Indian stock market will be moderately affected by global volatility, cushioned by strong domestic inflows. This resilience was demonstrated during the October FIIs sell-off, where a record net outflow of ₹1 lakh crore by FIIs was effectively balanced by an equivalent net inflow from DIIs.
In this environment, we expect domestic demand-driven sectors, particularly consumption stocks, to outperform the broader market. This view is in contrary to current FMCG selling due to weak Q2 results. We expect the current challenges of high input costs (soft commodity) prices to ease by 2025.Generally, we expect domestic orientated stocks to perform better amid a global slowdown. Other promising sectors are infrastructure, new-generation companies, manufacturing, and chemicals. This outlook is based on expectations of a stable domestic economy, a projected reduction in domestic inflation, and the positive impact of the China Plus strategy (PLI) on business growth. Additionally, we are optimistic about large private banks and NBFCs, which are currently trading below the long-term average valuation due to an increase in operational risk. We expect the level of NPA to moderate and the RBI to rate cut in 2025.
