Volatility presents opportunities for patient investors
Investors should focus on diversification across sectors to mitigate risks and maintain a long-term horizon to capitalise on India’s strong fundamentals, suggests Nikhil Rungta, Co-Chief Investment Officer (Equity), LIC Mutual Fund Asset Management Limited, in this exclusive interview.
What are your expectations for the Indian equity market in 2025, and how should investors position themselves to make the most of the opportunities ahead?
As we approach 2025, the Indian equity market may offer a cautiously optimistic outlook, shaped by global economic dynamics and domestic developments. As per Reuters, analysts expect modest growth, with the Sensex projected to reach around 87,450 by the end of 2025, reflecting a 9.2 per cent rise. This growth will likely be driven by resilient corporate earnings and macroeconomic stability. Key sectors such as automobiles, telecommunications, insurance and real estate may be poised to benefit from domestic consumption growth and structural reforms.
Investors should focus on diversification across sectors to mitigate risks and maintain a long-term horizon to capitalise on India’s strong fundamentals, including favourable demographics and urbanisation. While short-term volatility is inevitable, disciplined investing and sectoral exposure to growth areas may position investors to make the most of the opportunities in the evolving market landscape. Ultimately, investors should always focus on the creation of wealth as per their short-term and long-term requirements and not get swayed by intermittent fluctuations.
How do you assess the current scenario, especially with the ongoing volatility in the Indian equity market along with global economic uncertainties?
The Indian equity market is currently grappling with volatility stemming from both domestic and global factors. Recent developments, such as one of the big group controversies, have dampened sentiment, while global uncertainties, including fluctuating US interest rates, add to investor caution. The depreciation of the Indian rupee and sustained foreign portfolio outflows further underscore these challenges.
However, India’s robust economic fundamentals, supported by strong GDP growth and healthy forex reserves, offer resilience. The Reserve Bank of India remains confident in the country’s ability to withstand external shocks. For investors, focusing on sectors driven by domestic demand, such as consumption and infrastructure, along with a diversified and long-term investment approach, may help navigate this period of uncertainty while leveraging India’s growth potential.
As we enter 2025, which sectors in your opinion, are poised for growth in the coming quarters?
As we enter 2025, the market dynamics suggest that while certain sectors like renewable energy, electric vehicles, healthcare, infrastructure and IT are poised for growth, the real performance drivers will likely be individual companies with strong fundamentals and execution capabilities. This reflects a bottom-up market environment where stock-specific opportunities will dominate over broader sectoral trends.
Investors should focus on businesses with robust balance sheets, clear growth trajectories and the ability to capitalise on structural tailwinds. Identifying quality companies within these high-growth sectors may be key to generating superior returns in this nuanced and selective market landscape.
Given the current performance of Mid-Cap and Small-Cap stocks, how do you balance risks and returns in these segments?
Mid-cap and small-cap stocks have shown strong performance recently, but they come with inherent volatility and higher risks compared to their Large-Cap counterparts. Balancing risks and returns in these segments requires a disciplined approach. Diversification within the portfolio is the key to mitigating sector-specific or company-specific risks, while a careful allocation ensures that mid-caps and small-caps complement the overall portfolio without disproportionate exposure.
Regular monitoring and valuation assessments are critical, as these segments often witness sharp price fluctuations. Additionally, maintaining a long-term perspective helps investors ride through short-term volatility and capitalise on the growth potential of emerging businesses. By blending rigorous research with prudent risk management, optimising the returns should be the clear focus while safeguarding investor capital in these dynamic market segments.
How are themes like digital transformation, green energy or India’s manufacturing push impacting your investment strategies?
Themes like digital transformation, green energy, etc. are becoming central to our investment strategies, as they align with India’s structural growth drivers and long-term economic potential. Digital transformation is creating opportunities across sectors, from IT services to fintech, as businesses increasingly adopt technology to enhance efficiency and scalability. Companies enabling this shift, such as those in cloud computing, artificial intelligence and automation, are the key areas of focus.
The green energy transition is another transformative theme. With India committing to ambitious renewable energy targets, sectors like solar, wind and electric vehicles offer compelling opportunities. Investments are directed towards companies with innovative solutions and strong execution capabilities in this space. Add this to the fact that India’s power demand is on the rise, both in terms of industrial usage as well as domestic need with the increasing demand for automation and tools that call for more power.
How does LIC Mutual Fund differentiate itself in the competitive Indian mutual fund landscape?
LIC Mutual Fund distinguishes itself in India’s competitive mutual fund landscape through a combination of legacy, strategic partnerships and a diverse product portfolio. Established in 1989 by the Life Insurance Corporation of India (LIC), amongst the world’s largest life insurers, LIC Mutual Fund benefits from the trust and credibility associated with its parent company. This association instils confidence among investors, leveraging LIC’s extensive experience and reputation in the financial sector. In terms of offerings, LIC Mutual Fund provides a comprehensive range of schemes catering to various investor risk appetites and financial goals.
With many different schemes, from equity, debt and hybrid categories, the fund house ensures that investors have access to products aligned with their specific needs. Furthermore, LIC Mutual Fund emphasises investor education and engagement, leveraging LIC’s extensive distribution network to reach a broad audience across urban and rural areas. This widespread presence facilitates personalised services and fosters strong investor relationships, setting it apart from its competitors. By integrating a trusted legacy, strategic institutional support, a diverse product suite, and a commitment to investor-centric services, LIC Mutual Fund can effectively differentiate itself in the Indian mutual fund industry.
What advice would you give to retail investors looking to navigate the complexities of equity investments in 2025 and beyond?
For retail investors navigating equity investments in 2025 and beyond, my primary advice is to adopt a disciplined, long-term approach while staying informed and focused on their financial goals. Equity markets can be volatile, especially given the global uncertainties and domestic fluctuations we anticipate. However, volatility also presents opportunities for patient investors who can ride through short-term market movements.
Diversification is the key—avoid concentrating your investments in a single sector or stock. Instead, opt for a mix of sectors and stocks across market capitalisations that align with your risk tolerance. Systematic investment plans (SIPs) are an excellent way to average costs and build wealth over time. Stay invested in themes with structural growth potential while ensuring a balanced portfolio. Finally, consult a financial advisor or rely on professionally managed mutual funds to make informed decisions, particularly if you are new to equities.
Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.