How to maximise returns amid market fluctuations: Investment insights from Abhijit Bhave of Equirus Wealth

Indian and global equity markets are experiencing high volatility in October. As of October 25, the large-cap equity benchmark BSE Sensex has declined by nearly 7% over the past month. In an exclusive interview with Business Today, shares his insights on navigating the current market volatility and investment strategies for high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs).

Bhave discusses optimal asset allocation, the potential impact of the upcoming US elections on global markets, and the role of gold and silver as safe-haven assets. He also outlines a strategic approach to investing Rs 50 lakh over the next few years and provides his outlook on foreign investments and the Indian economy's growth prospects. Edited excerpts:  Q). The equity markets are witnessing high volatility. Where should HNIs and UHNIs allocate their money?

Abhijit Bhave: In a volatile market, HNIs and UHNIs should focus on realigning their portfolios in line with their asset allocation. For example, if someone is under-weight on equities, he / she can add equity allocation and take advantage of the present market corrections. A balanced mix of equities, fixed income, and alternatives like gold can help mitigate risks in the long term. Within equities, it’s advisable to stick to larger companies with strong fundamentals, particularly in sectors like banking & financial services and healthcare, which offer resilience. Fixed-income instruments such as high-quality corporate bonds can offer a safety net. At the same time long term debt allocation including long-dated bonds, gilt funds & long-term debt funds can offer the double benefit of present higher interest rates and future possible capital appreciation, as the RBI starts the rate reduction cycle sometime next year. And finally, a 5-10 % allocation to gold can serve as a hedge against inflation and global uncertainties.

Q). Should investors add gold and silver to their portfolios at current levels? If so, why and by how much? Abhijit Bhave: Yes, adding gold and silver to a portfolio is sensible in the current environment of geopolitical uncertainty and inflationary pressure. Gold, in particular, serves as a crisis currency and a hedge against the impact of global events that can lead to market corrections. Silver, on the other hand, benefits from both its industrial demand and its role as a safe haven. Investors should consider allocating around 5-10% of their portfolios to these precious metals, with a primary focus on gold.

Q). How would you suggest investing Rs 50 lakh in this market to generate superior returns over the next 2-3 years? Abhijit Bhave: To generate superior returns over the next 2-3 years, Rs 50 lakh can be allocated across different asset classes, with a bias towards equities. I suggest allocating 70% towards equities, around 20-25% in highly rated debt instruments for stability, and 5-10% in gold as a hedge. Within the equity portion, a core and satellite portfolio approach would be suitable. About 50% of the equity allocation should be in high-quality large-cap stocks. The remaining portion can be divided, with 20% in multi-cap or flexi-cap portfolios, 20% in mid- and small-cap stocks, and 10% in sectors like banking, financial services, and healthcare, which are expected to outperform.

Q). What could be the possible impact of the US elections on global and Indian markets? Abhijit Bhave: US elections traditionally create volatility across global markets. The outcome can influence trade policies, interest rates, and geopolitical trends. For Indian markets, if the US moves towards fiscal tightening or protectionist policies, it may dampen global liquidity and lead to FII outflows. However, if the election results signal a focus on global trade recovery and economic collaboration, it could create a favorable environment for Indian equities, especially in export-let sectors like IT & pharmaceuticals.

Q). What are your expectations regarding FIIs? Could China, with its lower valuations, attract significant foreign investment away from Indian equities? Abhijit Bhave: While China’s lower valuations may appear attractive, especially given the recent fiscal and monetary measures, India’s long-term growth prospects—supported by favorable demographics, digital transformation, and a pro-growth policy environment—remain appealing to FIIs. China also faces structural challenges, including political risks and regulatory uncertainty, which may deter long-term foreign investment. Therefore, although there could be some temporary FII outflows from India in favor of China, India’s robust consumption story and stable regulatory environment will continue to attract foreign capital.

Q). What are your expectations for the Indian equity market and the broader economy moving forward? Abhijit Bhave: The Indian equity market is poised for steady growth, driven by strong domestic consumption, ongoing reforms, and infrastructure development. Sectors such as financial services, healthcare, and select companies in IT are expected to continue performing well. The broader economy is likely to benefit from government initiatives aimed at boosting manufacturing, digitization, and export growth. However, geopolitical events and the risk of higher inflation may present short-term challenges. Overall, the outlook remains positive for long-term investors who focus on quality stocks.