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Motilal Oswal Private Wealth has alerted the Indian markets on the impact of increasing crude oil prices and geopolitical events in its Alpha Strategist October 2024 Report. However, the report also says that sustained inflows from domestic investors and strong corporate fundamentals will act as a ‘Suit of Armour’ for Indian markets and cushion the valuations.
The report also said that the time has come to lower the expectations on earnings growth. Here’s what the report has to say on the markets and portfolio strategy.
Market view
- Indian volatility index (VIX) has increased by 25% from 12 to 15 in a few days
- Nifty Smallcap 250 and Nifty Midcap 150 are trading at significant premium of 38% and 35%, respectively compared to their long-term average
- Decent earnings growth and return on equity are expected across Indian companies and sectors
- Crude oil prices have shot up due to the recent Iran-Israel tension
Gold Outlook
- Geopolitical tensions have added to the risk premium for gold; further escalating tensions could continue to boost its appeal
- Central bank buying, festive and wedding-related domestic demand could boost sentiments
- Over the next 2 years, gold could be on track to hit fresh highs
Portfolio strategy
- Investors should follow a staggered investment approach in equity by investing in large and multi cap strategies over a 3-month period and in mid and small cap strategies over 6-12 months
- 30-35% of the portfolio should be invested in multi asset allocation funds and equity savings funds
- In fixed income, 30% of the portfolio should be in actively managed duration funds and long-term maturity G-sec papers to benefit from accrual income and potential mark-to-market gains
- 30-35% of the fixed income portfolio can be invested in private credit strategies, REITs/InvITs & select high yield non-convertible debentures (NCDs)
- Investment can be made in floating rate instruments for 9 to 12 months and in arbitrage funds for 3 to 6 months for liquidity management
