Avoid big bets, protect portfolios amid geopolitical tensions: Analysts

Mumbai: The sharp decline in Indian equities of late has shifted the conversation among wealth advisors from chasing returns to protecting portfolios.

Advisors say the immediate priority is defence as geopolitical tensions cloud the near-term outlook for markets.

“Events are unfolding, and it is difficult to predict how things will pan out over the next few days. Investors should work towards protecting their portfolios, and not make aggressive equity bets, but have a wait-and-watch approach,” says Juzer Gabajiwala, director, Ventura Securities.

Geopolitical tensions have dragged the Nifty 50 down 7% from its February 3 peak of 26,341. Over three months, the index is lower by 4.4%, though it still shows a 9.6% gain over the past year.

Financial planners caution investors against making hasty lump-sum allocations to equities, noting that the duration of the conflict and its potential impact on oil prices remain uncertain.

“Historically, it has been seen that the impact of oil and geopolitical issues could take anywhere between 1-6 months to settle down, and for the markets to come back to normal,” says Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

Dhawan says investors with near-term liquidity needs should review their portfolios carefully. “Those who need liquidity within the next six months could exit right now, while those who have a year could wait for some time before withdrawing money,” he says. While some wealth managers see opportunity in the correction, they emphasise that any fresh investments should be guided by disciplined asset allocation.

“The current shake-up offers a good entry point,” says Nirav Karkera, head of Research, Fisdom. He recommends sticking to asset allocation and adding to large-cap oriented funds in a staggered manner over the next three months.

Some advisors say corrections can also be an opportunity to rebalance portfolios back to the intended asset allocation if equity exposure has drifted higher after the long market rally.

Diversification, advisors say, remains the bedrock of portfolio protection during periods of volatility.

“Debt acts as a cushion against an equity market downturn, while gold acts as a portfolio stabiliser and defensive asset,” said Karkera.

For equity enthusiasts, investors could go for large-cap-oriented funds rather than taking aggressive exposure to more volatile segments of the market.