Samvat 2083: Nifty, Nifty Next 50 offer attractive opportunities as FII inflows return, says Rahul Jain of Nuvama Wealth

After a year marked by market volatility, persistent foreign institutional investor (FII) selling and a correction in broader market valuations, investors are entering Samvat 2083 with a renewed focus on portfolio allocation and risk management. While the correction has made valuations more reasonable, the next phase of wealth creation will require investors to look beyond short-term market movements and reassess their asset allocation in line with their risk appetite and investment horizon.

Rahul Jain, President and Head, Nuvama Wealth Management, believes the Nifty and Nifty Next 50, which largely represent large-cap stocks, are trading at discounts of 10% and 27%, respectively, to their five-year averages. He also highlights the growing role of alternative investments and global funds in diversifying HNI portfolios. In an interview with Fortune India, Jain shares his outlook for Samvat 2083, common investment mistakes to avoid, and five stocks that stand out on technical charts for a one-year investment horizon.

1. Indian equities have gone through a phase of correction and valuation reset amid persistent FII selling and global uncertainty. How should investors approach the market at this stage? Is it time to increase equity exposure or first rebalance existing portfolios?

Answer:

After a prolonged period of underperformance and higher volatility, the portfolio must be reviewed to assess the current asset allocation against the stated asset allocation and identify the performers and laggards. Once the gaps are identified, they may be suitably addressed. In the process, the portfolio can be positioned for efficient future performance.

2. With valuations becoming more reasonable, which market segments offer the best risk-reward in Samvat 2083? Should investors look at large-caps for stability or consider opportunities in mid- and small-caps after the correction?

Answer:

I think the portfolio should have a mix of large-, mid-, and small-caps based on the investor’s risk profile and investment horizon. Having said that, I prefer adding the Nifty and Nifty Next 50, essentially large-caps, as these are trading at steep discounts of 10% and 27%, respectively, to their five-year averages. Moreover, this space is under-owned by FIIs. As and when FIIs return, they will first add these stocks to their portfolios before looking at undervalued small- and mid-caps.

3. Beyond equities and bonds, alternative investments are increasingly finding a place in HNI portfolios. What is driving this shift, and which asset classes, such as private equity, private credit, real estate, or structured products, are emerging as meaningful wealth-creation opportunities?

Answer:

Alternative funds investing in private equity, private credit, real estate, and infrastructure help meaningfully diversify portfolios, allowing investors to capture opportunities outside the listed space. These investments have different risk-return characteristics compared to traditional avenues, offering the potential for higher returns and income. They also tend to have a low correlation with listed markets, helping reduce overall portfolio risk and improve stability.

4. Global diversification is becoming increasingly important amid geopolitical tensions, trade uncertainty, and currency fluctuations. How should Indian investors build international exposure? Do global funds and funds of funds offer a more effective route than investing directly in overseas stocks?

Answer:

India accounts for only about 4% of the global market value. Therefore, most Indian investors are missing out on investment opportunities outside India. There are attractive investment opportunities in sectors such as defence, aerospace, deep tech, AI, biotechnology, climate, and energy transition that are not meaningfully available in India. While investors can invest directly in these companies, managing a portfolio requires expertise and access to information. A simpler approach is to invest through global funds, which are easier to access through the GIFT City route.

5. How has the wealth allocation strategy of Indian HNIs evolved over the past few years? Are investors moving away from traditional equity-heavy portfolios towards a more diversified mix of domestic equities, global assets, and alternatives?

Answer:

HNI portfolios are increasingly seeing higher allocations to alternatives such as private equity, private credit, startup funds, real estate and infrastructure funds, REITs, InvITs, and market-linked debentures. These investments provide access to a broader set of opportunities beyond traditional stocks and bonds while helping improve portfolio diversification.

 6. In a volatile market environment, what are the most common portfolio mistakes investors should avoid? How frequently should HNIs rebalance their portfolios, and what role should liquidity and downside protection play in their investment strategy?

Answer:

Not reviewing the portfolio to identify gaps in asset allocation and diversification, as well as performers and underperformers.

Making hasty investment decisions out of panic.

Investing out of FOMO.

Abandoning a well-thought-through investment plan in favour of the "flavour of the season."

Discontinuing SIPs in an attempt to time the market.

Acting on market rumours and unverified information rather than relying on the wealth manager.

7. Looking ahead to Samvat 2083, which five stocks stand out on technical charts for a one-year investment horizon? What are the key triggers, upside targets, and recommended accumulation levels for these picks?

Answer:

A few picks include Adani Energy Solutions, Punjab National Bank, Zydus Lifesciences, Coforge Ltd., and KDDL Ltd.