I have ₹10 lakh in cash—How should I invest it to get maximum returns?

I have ₹10 lakh in cash right now. What’s the best way to invest it for maximum returns, considering current market conditions?

Reply by Karan Aggarwal, Co-founder and CIO, Elever, a quant-based PMS portfolio manager

Correction in the Indian markets in the last 7 months was largely driven by local factors such as extremely high valuations in some segments and a slowdown in the GDP growth rate in last few quarters. With Trump's tariff plans and DOGE spending cut, there is a significantly high risk of US recession in next few quarters, which can lead to further deepening of the correction with the moderate possibility of a full-fledged bear market. However, if US recession risk does not materialise, we can see the recovery of 10%-15% from the present level by June 2025.

US recession can expose investor would be exposed to noteworthy downside risk. During 2008 GFC bear market, Sensex went down by around 60% from all-time highs. If present US crisis creates similar impact, investors can lose more than 1/3rd of their lumpsum investment in next 3-6 months.

STP seems a much better option as investors can park money in low-risk liquid funds and can transfer 5% every month for the next 20 months. It allows investors to participate in a market rally while reducing the downside risk. Moreover, in case of further dips, investors can increase STP to opportunistically to benefit from the dip.

For example, during 2008 GFC crisis, an investor investing lumpsum at peak of Dec 2007 would have achieve break-even only in Dec 2013 while a time-diversified STP approach, with contribution spread over 20 months, achieved break-even in April 2009, just 14 months after a massive bear market with 60% drawdown.

If an investor has INR 10 Lakhs, we would recommend investor to park 10 Lakhs in floating rate fund with STP of 50,000 to main portfolio each month. Next 12-18 months can be quite turbulent and gradual deployment would protect investor against volatility spikes.

STP for 16 months must be deployed in the following manner:-

1) 12.5% - Gold ETF or FoF

2) 12.5% - US ETF or FoF

3) 37.5% - Nifty 50 Index Fund

4) 25% - Nifty Midcap 150 Index Fund

5) 5% - Nifty 200 Momentum 30 Index fund

6) 2.5% - Nifty Alpha 50 Index Fund.

7) 2.5% - Nifty 200 Alpha Low vol Index Fund

8) 2.5% - Nifty 200 Quality 30 Index Fund.

Gold and international equity provide suitable diversification benefits as both display significantly low or negative correlation with Nifty 50 index. Large cap and  Midcap exposure is given through index funds as it takes out manager selection risk out of picture, as nearly 50% midcap and largecap mutual funds underperform their respective benchmark. Apart from that, a mix of factor funds has been added to improve rthe isk-adjusted returns of the equity slice.

After 16 STP, nearly ₹2 Lakhs would be remaining in floating rate fund. Floating rate fund is an ideal debt vehicle with moderate interest rate with duration of around 1 year while simultaneously providing returns equivalent to mid to long duration funds.

Final allocation at the end of 16 months:-

1) largecap -30%

2) Midcap - 20%

3) Factor Funds - 10%

4) Gold - 10%

5) US Equity -10%

6) Floating Rate Fund - 20%

Views are personal.