Expert view: Amit Bivalkar, Head – Wealth at Equirus Group, says investors should reset their return expectations and avoid taking extreme positions in equities. In an interview with Mint, Bivalkar said the market appears resilient on the surface, but there are clear signs of tightening underneath. He cautions investors against taking extreme positions in the current environment. Edited excerpts:
What is your take on the current market structure? Do you see any structural weakness?
To begin with, my view on the current market structure is that it appears resilient on the surface, but there are clear signs of tightening underneath.
India continues to remain one of the fastest-growing major economies, although growth expectations are gradually moderating as external headwinds build.
Inflation, which had remained relatively benign for a large part of the previous year, is beginning to inch up again, while wholesale inflation indicates rising cost pressures within the system.
What is equally important is the external environment. The widening current account deficit, softer domestic demand trends and elevated input costs suggest that the market is entering a more demanding phase.
High-frequency indicators continue to show expansion, but at a slower pace compared to the strong post-pandemic recovery period.
Globally as well, growth is expected to moderate while inflation remains sticky, creating a more challenging macroeconomic backdrop for markets worldwide.
So, I would not describe this as a structurally weak market. However, I would certainly say that we are moving into an environment where earnings quality, balance sheet strength, cost management and external vulnerabilities will matter far more than liquidity-driven momentum.
Is it the right time to increase exposure to equities, or should one hold cash and wait for more stability?
I would caution investors against taking extreme positions in the current environment.
This is neither a phase to become excessively aggressive on risk nor a time to completely retreat into cash.
Markets are transitioning from a liquidity-driven cycle to one that will increasingly be driven by earnings growth, cash flows and valuation discipline.
Equities will continue to benefit from India’s long-term structural growth story, but returns are likely to be more measured compared to the extraordinary gains witnessed during the post-pandemic rally.
At the same time, fixed income has regained relevance because it offers stability, visibility and relatively attractive yields in a volatile environment.
My approach would therefore be cautiously optimistic. Investors should continue to stay invested in equities, but exposure should be built gradually and with discipline through staggered allocations.
Simultaneously, increasing exposure to fixed income, both domestically and selectively overseas, can help create balance and resilience within the portfolio.
There has been a key shift in investor behaviour in the post-pandemic world. What behavioural mistakes are the biggest destroyers of long-term wealth creation?
If I were to highlight what has changed most in the post-pandemic world, it would be investor behaviour.
We have seen a dramatic rise in retail participation, but this has also brought with it a set of behavioural pitfalls.
Overconfidence and herding behaviour are among the most visible trends today. Many investors are increasingly driven by momentum, social media narratives and short-term trends rather than underlying fundamentals.
Emotional decision-making has also become more common, with investors reacting impulsively to market volatility instead of remaining aligned with their long-term financial goals.
Behavioural biases such as loss aversion, fear of missing out, and panic selling during corrections often end up destroying far more wealth than market cycles themselves.
In my view, disciplined investing, patience and the ability to stay invested across cycles remain the most important differentiators between successful long-term investors and those who struggle to create sustainable wealth.
How do you define “realistic return expectations”? What are the key things investors should understand before starting to invest?
Investors today need to reset their return expectations. Markets are unlikely to deliver the kind of extraordinary returns seen during the liquidity-fuelled post-pandemic phase.
Going forward, return profiles are likely to become more moderate and closely linked to economic growth, earnings quality and valuation discipline.
In the current environment, it is more realistic to expect moderate double-digit returns from equities over the long term, while fixed income is likely to generate relatively stable mid-single-digit returns.
More importantly, investors must understand that returns are never linear and that volatility is an inherent part of investing.
Short-term corrections and market fluctuations should therefore not be viewed as failures, but as part of the investment journey.
Before beginning their investment journey, investors should also recognise that asset allocation is far more important than individual stock selection.
The balance between equity, debt and other asset classes ultimately plays the biggest role in determining long-term outcomes.
Equally important is aligning investments with one’s financial goals, time horizon and risk tolerance rather than chasing short-term market trends.
What is the role of portfolio rebalancing in long-term wealth creation? Is it possible to build an all-weather portfolio?
In my view, portfolio rebalancing is one of the most effective yet underutilised tools in long-term wealth creation.
Rebalancing introduces discipline into the investment process by ensuring that investors do not become excessively exposed to any single asset class during market rallies or corrections.
It systematically helps investors book profits, reduce concentration risk and redeploy capital into relatively undervalued areas of the portfolio.
Over long periods, this disciplined approach can significantly improve risk-adjusted returns while also reducing the emotional element in investing decisions.
In volatile market conditions, especially, rebalancing helps maintain stability and alignment with long-term financial objectives.
As for the idea of an all-weather portfolio, I do believe it is possible, but it must be understood correctly.
It is not about maximising returns in every phase, but about building resilience across cycles.
A well-constructed portfolio should have a balanced mix of equities for growth, fixed income for stability, and some allocation to diversifiers.
To summarise my overall stance, we are in a transition phase.
Growth is moderating, inflation pressures are gradually building, and external balances need monitoring.
Markets will continue to offer opportunities, but they will reward discipline rather than aggression.
I remain constructive on the long-term outlook, but in the near term, I would advocate a measured approach with balanced asset allocation and a meaningful role for fixed income alongside equities.
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Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.