Asset allocation and sectoral bets for the next 5 years: Investment insights from Sapient Finserv’s Amit Bivalkar

As markets remain volatile and Global market trends are shifting rapidly, investors are seeking clarity on how to position their portfolios for both stability and growth. In this in-depth conversation with BT, Amit Bivalkar, Founder Director at Sapient Finserv, shares practical and forward-looking insights on asset allocation, sector opportunities, market valuations, and long-term wealth creation strategies tailored for today’s uncertain environment.

Q: In today’s uncertain market, how would you invest a Rs 50 lakh portfolio?
Bivalkar: In this environment, the focus should be on stability, not just returns. If I had Rs 50 lakh to invest, I would divide it into three parts. The first part, about 60%, would go into large-cap mutual funds, balanced (dynamic asset allocation) funds, and short-term debt funds. This part provides steady growth. The second part, around 30–35%, would go into mid- and small-cap funds, which offer higher growth but come with more risk. The final portion, about 5–7%, would be kept in precious metals like silver and in liquid funds, to use during emergencies or to adjust the portfolio during market changes. It is important to review and update the portfolio every 6 to 12 months. Like a garden, investments also need care and regular attention.

Q: Which sectors do you think will do well over the next 3 to 5 years?
Bivalkar: Several areas in India look strong for future growth. Financial services—such as fintech, insurance, and investment platforms—will benefit from India’s rising income and better financial access. Consumer products and services will grow as people spend more, especially after recent changes in tax rules. I also see promise in fast food (QSR), artificial intelligence, and businesses that use new technology with traditional models. Investors should not follow current trends blindly but should think about where value will come from in the next few years.

Q: Are Indian stock markets overvalued right now or is there more room to grow?
Bivalkar: It is true that stock prices, especially in mid- and small caps, are high. But we need to consider the full picture. India’s economy is growing at 6–7%, company profits are rising, and companies are starting to spend more on expansion. So, while some stocks are expensive, there are still good opportunities if we focus on companies with strong earnings. Rather than asking if the market is too expensive, it is better to ask where the hidden value is—such as in large-cap stocks, exporters, insurance firms, and utility companies. High prices alone do not cause market falls; fear and weak earnings do.

Q: Should investors invest a lump sum now or go through SIP or STP?

Bivalkar: Unless someone is very experienced, I would not suggest putting all their money into the market at once. Prices are high, global markets are unstable, and there is a lot of uncertainty. A better way is to keep the money in a low-risk fund, such as a liquid or short-term debt fund, and slowly move it to equity over 6 to 9 months through an STP (Systematic Transfer Plan). SIPs (Systematic Investment Plans) are still one of the best ways to build wealth over time. Long-term investors do not need to worry about timing the market—they should give it time.

Q: What global or local trends should equity investors keep an eye on?

Bivalkar: There are a few big things that affect the stock market. First is the direction of interest rates in India and the US, because money moves to places where it earns more. Second is the price of crude oil and other commodities, which can impact costs and company profits. Third is the slowdown in China, which may help Indian exports. Fourth is the movement of the Indian rupee against the US dollar, which matters for IT and pharma companies. And finally, global events—like US elections or tensions in the Middle East—can affect trade and money flows. Investors should look beyond daily news and focus on these larger changes.

Q: How should long-term investors divide their money between large-, mid-, and small-cap stocks?
Bivalkar: This requires careful balance. In the current situation, I suggest a more cautious approach: around 60% in large-cap funds or flexible funds that prefer large caps, 15% in mid-caps, and not more than 15% in small-caps. Small-caps should only be considered if the investor has a 7–10-year horizon and can take more risk. Think of large-caps as the base of your portfolio, mid-caps as the growth engine, and small-caps as the high-speed boost. If this feels confusing, investors can choose multi-asset or dynamic equity funds, where a professional fund manager takes care of the allocation.

Q: How can investors reduce risk and still grow their wealth?

Bivalkar: The biggest risk is not the market going down—it is reacting badly when it does. Investors must follow some simple rules. First, invest in diverse types of assets: equity, debt, gold, and even international options. Second, rebalance the portfolio every year so that no part becomes too large or too small. Third, always keep an emergency fund to avoid selling investments in panic. Fourth, have clear goals. When you invest for a reason, it’s easier to stay calm during market ups and downs. If you're unsure about managing all this, dynamic asset allocation funds are a smart option—they adjust based on market trends and reduce mistakes.

Q: What is your long-term view on the Indian stock markets?

Bivalkar: I have a positive view of India’s long-term future. We are not just growing quickly—we are growing in a smart and structured way. India has a young population, growing digital systems, a government focused on infrastructure, and private companies that are becoming more competitive globally. There will be challenges along the way, but India is moving from a hope-driven story to one based on actual performance. The next decade could belong to India, just as the last decade belonged to US technology or Chinese manufacturing. My advice to investors is simple: don’t worry about whether the market will rise or fall by 10% in the short term. Focus on preparing for the next 10 years.