It is a challenging time for investors. Major asset classes- equities and gold- have been highly volatile due to the US-Iran war. With failing, the near-term outlook for equities remains hazy, and there is a strong risk that ‘higher-for-longer’ crude oil prices may derail India’s economic growth momentum.
With benchmark indices down about 10% year-to-date and swinging between gains and losses, investors appear confused about what their investment strategy should be at this juncture.
Can one make her portfolio war-proof?
While asset classes like equities and gold are volatile, investors can make their portfolio resilient by diversifying it, making it a perfect mix of quality stocks, gold, and debt.
“To make your portfolio more resilient amid the lingering geopolitical uncertainty, the core idea is diversification, quality focus, and a tilt toward stability without abandoning long-term growth,” Vinit Bolinjkar, the head of research at Ventura, noted.
Historically, initial dips from geopolitical events have often been followed by rebounds driven by domestic fundamentals.
Experts underscore that while geopolitical factors tend to create sharp corrections, these phases allow disciplined investors to accumulate high-quality businesses at more attractive valuations.
“In a market environment shaped by geopolitical uncertainties, particularly the ongoing tensions in West Asia, portfolios should not be positioned around short-term outcomes. The recent correction, with benchmark indices declining about 8–10% from recent highs, reflects consolidation rather than any structural breakdown within the broader cycle,” Tushar Badjate, Director of Badjate Stock & Shares Pvt. Ltd., noted.
Badjate highlighted that during events like the 2022 Russia–Ukraine conflict, markets corrected 10–15% but recovered within months, eventually moving to new highs.
Badjate expects market stability to improve over the next 12–18 months with upcoming triggers such as the 2026 US Midterm Elections and potential shifts in the US Federal Reserve policy.
India’s macro backdrop remains supportive, with GDP growth projected at 6–7%, GST collections sustaining above ₹1.7 lakh crore, and government capex exceeding ₹11 lakh crore.
Portfolio allocation
Bolinjkar said one should view equities as the core growth engine, but be selective, reducing or tilting defensively versus the usual 60-70% in bull markets. Focusing on large-caps ensures liquidity and stability.
For the sectors, Bolinjkar recommends defence due to strong tailwinds from potential higher spending; pharma or healthcare due to stable demand and export resilience; FMCG or consumer staples, as they are defensive; IT for being relatively insulated from the US-Iran war; and banking and financials as they could benefit from India’s growth story.
Moreover, Bolinjkar suggests infrastructure, capital goods, cement, and power sectors as long-term domestic capex themes.
For gold, Bolinjkar said investors should target a 10-15% strategic hedge at this juncture, as gold is an excellent diversifier with low correlation to equities.
“In India, prefer Sovereign Gold Bonds (SGBs) for 2.5% interest + tax efficiency, or gold ETFs/mutual funds for liquidity. Physical gold works for cultural/emotional reasons but has storage costs,” Bolinjkar said.
Debt is a stability anchor. According to Bolinjkar, investors should consider high-quality government securities (G-secs/gilt funds), short-to-medium duration debt funds, or PSU/corporate bonds.
Debt provides predictable income and acts as a buffer when equities wobble. However, Bolinjkar suggests avoiding long-duration debt if rates are volatile.
According to Badjate, maintaining 80–85% in equities and 15–20% in gold and silver remains prudent.
Gold has delivered nearly 15% returns over the past year, reinforcing its hedge value. Fresh allocation to metals becomes attractive on dips, particularly near ₹1.2–1.3 lakh for gold, Badjate said.
Within equities, Badjate advises a staggered approach, focusing on infrastructure, defence, metals, digital infrastructure, and healthcare, where earnings visibility remains strong at 12–14% growth expectations.
Bhuvan Gupta, CIO at Client First Capital, noted that recent developments in the Strait of Hormuz have reinforced gold’s role as a strategic hedge.
However, allocation should be balanced. Gold is less about returns and more about resilience and diversification.
For equities, Gupta recommends debt-light, cash-generating compounders as they not only withstand volatility but often use it to strengthen their position—through buybacks, acquisitions, or market share gains.
“For sophisticated investors, select gold miners can offer operating leverage to rising gold prices, though this requires careful evaluation of costs, jurisdiction, and capital discipline,” said Gupta.
“One can selectively rotate their funds to consumer staples, healthcare and utilities. Renewable and related sectors could clearly be a long-term winner from this conflict,” Gupta said.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, 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.