FY25 begins with a bang for Nifty; time for portfolio revamp to avoid base effect bite later

Within equities, experts say stocks that have run up much ahead of their fundamentals and peers should be looked at from a partial exit perspective.

With elections around the corner, we are entering a volatile period. Hence, the above will insulate the portfolio from sudden large shocks and at the same time enable participating in the market up-move as and when it happens," she said.

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Largecaps have given over 20% return while small and midcaps have given more than 50% returns in the last 1 year. The bias, therefore, has now shifted towards largecaps, whether it is stocks or mutual funds.

"Periodical rebalancing is needed for sure in an environment where things are changing very fast. The last 1 year has been fabulous for small and midcap-oriented funds. Due to this, the allocation towards these funds has been very high across the investors' communities as investors generally chase returns. However, there are still pockets of opportunities in those sectors but these are selective. So, it is advisable to increase large-cap exposure in the portfolio with a mindset of moderate returns rather than extraordinary returns going forward," said Mukesh Kochar, National Head of Wealth at AUM Capital.

As a category, debt is also likely to do well from here as interest rates have peaked out and global interest rates may start coming down around mid of the next calendar year.

"This should enhance the overall return in debt funds as interest rate and price are inversely related. Gold is also expected to do well in a schematic where the US will start easing the rate cycle and the dollar index may come down from here onwards. At the same time, many central banks have started increasing gold exposure. Apart from this, geopolitical risk is always there which should keep gold on the unmove," he said.

Even as the index is perched at all-time high levels, Union Mutual Fund's Fair Value Spectrum shows that the is trading in the fair zone in terms of market valuations. But the earnings outlook for the new financial year doesn't look rosy at all due to tempering of pent-up demand, increase in input costs, and a slowdown in the rural market.

"Corporate earnings growth has been upgraded after the Q3 results. However, for FY25, this growth trajectory is expected to taper off compared to the surge which was driven by pent-up demand from FY21 to FY24. For instance, the Midcap150 index's EPS (earnings per share) CAGR was 35%. The EPS growth in FY24 is estimated at 30% YoY and is forecast to slow to 20% in FY25," Geojit's Vinod Nair said.

As far as sectors are concerned, Anand Rathi is bullish on auto, IT, pharma, non-banking financial companies (NBFCs), and cement.

"Our optimism is grounded in their growth potential, sectoral dynamics, and favorable regulatory environment. These sectors stand to benefit from macroeconomic trends, technological advancements, and domestic demand patterns. Conversely, we advise a more cautious approach towards capital goods, engineering, infrastructure, and real estate sectors. These sectors face challenges stemming from regulatory hurdles, cyclical demand fluctuations, and investment cycles," it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)