Indian Markets Attractive; Flexi Cap Funds and Precious Metals Favored

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BY: Rahul Singh, CIO-Equities, Tata Asset Management

“The Indian markets have been in a sideways and consolidating phase for the last 9 to 12 months, but the good news is that valuations are becoming more reasonable with time correction, the Nifty 50 forward P/E is now below 21x, offering a good entry range in anticipation of growth accelerating into FY27.

While the GST reduction is a positive reform that could boost consumption in the second half, it created some temporary uncertainty in August and September, likely leading to a softer Q2 for consumption. However, this is short-term and we expect a gradual pickup ahead.

The trade and visa developments between India and the US have also added near-term pressure on the IT sector, a key index component, and that headwind may persist for a while. 

Overall, this remains a bottom-up market. Apart from banking, which continues to look attractive given strong balance sheets, low credit costs, and steady credit growth, sectoral opportunities are more stock-specific. In such conditions, Flexi Cap Funds remain our preferred category for the next 12–24 months as they can dynamically shift across market caps.

We also continue to favour gold and silver as strategic portfolio diversifiers amid policy uncertainty, de-dollarization trends, and ongoing geopolitical risks.

Mid and small caps are seeing valuation premiums narrow, but we recommend investors approach them through systematic investment or transfer plans to manage risk better.”

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