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Hans India
06-07-2025
- Business
- Hans India
Indian stock market set to hit record highs in festive season: Experts
The Indian stock market is poised to hit new record highs in the second half of 2025, especially during the festive season, backed by strong macroeconomic fundamentals and a revival in consumption, according to Ankit Patel, co-founder of Arunasset Investment Services. In an interview with Mint, Patel emphasized the importance of disciplined investing amid ongoing global uncertainties. He identified the pharmaceutical sector as a compelling contra bet, given its undervaluation and long-term potential. H1CY25: A Mixed Bag with a Turnaround The first half of 2025 began on a slower note due to deferred government spending linked to general elections. However, a significant policy shift by the Reserve Bank of India in February—marked by interest rate cuts, liquidity injections, and eased banking regulations—reversed the sentiment. This accommodative stance helped lift the economy, with Q4 FY25 GDP growth clocking in at an impressive 7.4%, showcasing resilience. RBI's massive dividend payout of ₹2.69 lakh crore further improved the fiscal landscape. Outlook for H2CY25 With inflation down to 2.82% and forex reserves remaining strong, India's macroeconomic conditions continue to support equity markets. Moreover, foreign institutional investors (FIIs) have turned bullish, pouring in over ₹23,000 crore over the past four months. Patel expects consumption-led growth and sectoral momentum to fuel a festive rally, likely pushing benchmark indices like the Nifty 50 past their previous peaks. Sectoral Insights While IT and banking remain core, Patel highlights pharma as a value pick amid cyclic underperformance. 'It's a classic contra bet with structural tailwinds,' he noted, advising investors to align their strategies with personal goals and risk appetites. As the markets gear up for Q1FY26 earnings, investors should stay focused, avoiding noise and short-term volatility, he added.
Mint
04-07-2025
- Business
- Mint
Expert view: Indian stock market may hit a record high during the festive season; pharma can be a strong contra bet
Expert view: The Indian stock market may surpass previous highs in the second half of the year, especially during the festive season, says Ankit Patel, the co-founder at Arunasset Investment Services. Talking to Mint's Nishant Kumar, Patel says investors should be disciplined and focused during times of uncertainty. Further, he believes pharma can serve as a strong contra bet. In an interview with Mint, Patel shared his views on markets, sectors that can generate alpha and his expectations from Q1FY26 results. Here are edited excerpts of the interview: The first half of the calendar year 2025 (H1CY25) experienced a sluggish start due to delayed government spending, primarily caused by election-related activities in the early months. However, February marked a turning point when the Reserve Bank of India (RBI) adopted an accommodative stance—cutting interest rates, injecting liquidity, and relaxing banking regulations—which set the economy on a higher growth trajectory. Q4 FY25 GDP growth was strong at 7.4 per cent, reflecting economic resilience. Also, RBI's record dividend pay-out of ₹ 2.69 lakh crore for FY25—one of the highest in recent history—further bolstered fiscal stability and the overall economic environment. India's macro fundamentals remain robust, with inflation at 2.82 per cent and high forex reserves, making the markets attractive. FIIs have been net buyers for four consecutive months, bringing in roughly ₹ 23,000 crore. With consumption poised to lead in the second half (H2) and sectoral support, markets are expected to surpass last year's highs, especially during the festive season. Geopolitical tensions have indeed become the new normal for markets, creating high levels of global uncertainty. However, markets naturally experience headwinds and tailwinds, and uncertainty often opens doors for strategic investing. Historically, asset values tend to increase when markets stabilise following periods of volatility, turning uncertainty into potential opportunity. To protect and grow wealth during such times, investors must adhere to disciplined strategies and avoid emotional decision-making. Maintaining a long-term perspective and sticking to well-defined plans are key. In the Indian context, despite global geopolitical challenges, markets have delivered positive results due to strong macroeconomic fundamentals, controlled inflation, and supportive monetary policies. By staying focused and disciplined, investors can navigate these turbulent times effectively and turn uncertainty into opportunities for wealth preservation and growth. Merchandise exports to the USA account for roughly 1.2 per cent of India's GDP. Pharmaceuticals are the top (14 per cent) merchandise exports to the USA, and they are exempt from the Trump tariff. The other sectors, like gems and jewellery, diamonds, and petrochemicals, do not have much exposure to stock markets. Engineering goods and auto components could really impact the stock market. Together, they account for a large percentage of India's engineering exports to the US (valued at around $5 billion), which will be affected. The main impact will be the FDI flow, which will be affected due to policy uncertainty. This will affect the entire globe, not just India. Policy uncertainty is the worst thing for private investment. Hope is that consumption will offset this. Rate cuts and liquidity injections have happened and a very important factor here is that inflation is low. Although the RBI reduced its inflation forecast to 3.7 per cent from its earlier projected 4 per cent for FY25-26, it is very likely that inflation will average around 2.5 per cent for the next six months. Such low inflation creates real purchasing power, and this is a recipe that usually results in increased consumption. An effective investment strategy should be tailored to individual goals, risk appetite, and comfort level with various asset classes. The key lies in understanding market cycles and aligning them with personal requirements, enabling better timing and allocation. Diversification across asset classes such as equities, bonds, real estate, and gold helps spread risk and optimise returns. Importantly, investors should remain unaffected by outside noise and market volatility. Staying disciplined, sticking to a well-defined plan, and making rational decisions are crucial for long-term success. Emotions can often drive poor choices, so maintaining a balanced perspective and focus on fundamentals will help build wealth steadily. Ultimately, a disciplined, goal-based approach and proper diversification are the foundation of a resilient and successful investment journey. To achieve alpha beyond traditional investment methods, investors should explore alternative strategies that offer higher return potential. Using PMS with high-conviction stock picks, which are not strictly benchmark-driven, can deliver stronger growth by focusing on select stocks with long-term potential. Additionally, participating in private equity, pre-IPO investments, buybacks, mergers and acquisitions, and IPOs can significantly enhance wealth creation opportunities by tapping into early-stage growth and corporate restructuring. The performing credit space, especially through category AIF funds, has gained popularity among high-net-worth individuals (HNIs) for its ability to generate consistent double-digit returns over time. Moreover, investing abroad via funds available in GIFT City, which allows transactions in foreign currencies, helps diversify currency risk. These alternative strategies provide diversified, high-potential avenues for investors seeking superior wealth accumulation and portfolio resilience. Pharma can serve as a strong contra bet for stock market investing. Despite market volatility, the pharma sector remains resilient due to consistent domestic demand and exports. India's pharmaceutical exports reached $24 billion in FY23, growing at 15 per cent annually, driven by generic medicines and vaccines. Government initiatives like 'Pharma Vision 2020' and increased healthcare spending support the sector's long-term growth prospects. Moreover, pharma stocks often trade at lower valuations compared to other sectors. During market downturns, select pharma companies tend to outperform, offering stability and upside potential. This contrarian stance can help diversify risk and capitalise on the sector's growth amid broader market uncertainties. Based on Q4FY25, the BSE 500 cohort showed a 10 per cent PAT growth and revenue growth of around 7 per cent. We expect profit growth to be slightly higher in Q1FY26 due to mild input cost reduction, a favourable base, and a continued rural demand recovery supported by a timely monsoon. With inflation expected to average around 2.5 per cent over the next six months, real purchasing power will increase, boosting consumption, moderated by monetary easing policies. Improved credit growth could benefit banking and financial services, while low interest rates are likely to boost real estate activity. However, recent market movements have been highly correlated across sectors, mainly driven by India's macroeconomic stability. Going forward, we see a shift towards a stock-picker's market, emphasising the need for selective investing rather than outsized bets on specific sectors. Read all market-related news here Read more stories by Nishant Kumar 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.
Economic Times
04-07-2025
- Business
- Economic Times
ETMarkets Smart Talk: Deploy, don't delay! Arun Patel advises long-term investors to stay invested in 2H2025
As market volatility tapers and India's economic fundamentals remain robust, long-term investors should stay the course rather than wait on the sidelines, says Arun Patel, Founder & Partner at Arunasset Investment Services, in this edition of ETMarkets Smart Talk. ADVERTISEMENT In a wide-ranging conversation, Patel shares his views on the market outlook for the second half of 2025, why domestic consumption remains a key theme, and how falling inflation and an accommodative RBI stance are creating a favourable environment for also outlines ideal asset allocation strategies for investors with a multi-decade horizon and highlights sectors like pharma, fintech, and quick commerce as emerging opportunities worth tracking. Edited Excerpts - Q) Thanks for taking the time out. We closed May on a high not but witnessed some volatility in June – is it geopolitical concerns weighing on sentiment?A) Thank you so much for having me. While June did see some volatility driven by geopolitical tensions, particularly the Israel–Iran conflict and worries about a wider regional escalation, these concerns turned out to be short-lived. A ceasefire held, and crucially, Iran refrained from blocking the Strait of Hormuz, likely recognising that such a move would have punished Asian economies more than its intended targets of Israel and the US. As a result, oil prices have returned to levels seen before the initial strikes. On the domestic front, India's macro fundamentals remain highly supportive. GDP for January–March rose to 7.4%, beating estimates, while May CPI eased to 2.82%. Forex reserves are near $700 billion, among the world's highest. Q4 FY25 saw a modest earnings recovery compared to the previous two quarters, with the BSE 500 delivering high single-digit revenue growth and around 10% net profit growth. ADVERTISEMENT Notably, excluding oil and gas, the broader BSE 500 universe recorded strong underlying PAT growth of about 12–14%, supported by healthy performance in pharma and consumer sectors.Q) As we are about to end 1H2025, what are your expectations or assumptions for the rest of the year?A) As we move into the second half of 2025, we expect consumption to drive growth. With inflation cooling, real purchasing power should rise meaningfully. ADVERTISEMENT The RBI's June 2025 policy statement revised its FY 2025–26 inflation forecast down to 3.7% from 4.0%, and we believe actual inflation could average even lower, around 2.5% over the next six months. This creates space for further monetary support, enhancing household spending private investment may continue to lag, particularly with global FDI flows subdued amid persistent policy uncertainty in key economies. Shifting regulations and trade frictions could discourage large investment decisions. ADVERTISEMENT Fortunately, India's domestic investor base has shown resilience, with steady flows even through recent volatility, providing a structural cushion for see the second half as a 'stock pickers' market,' where company-specific fundamentals will matter more than broad macro narratives. Investors should be nimble, focusing on quality businesses across all market caps. ADVERTISEMENT Overall, given strong domestic demand and policy stability, we expect Indian equities to surpass last year's highs before the year ends. Q) Are there any new or existing themes that are likely to do well in 2H2025? A) We believe domestic consumption will remain a standout theme in the second half of 2025. With inflation easing — the RBI now projects retail inflation at 3.7% for FY 2025–26, and we see the potential for an even lower 2.5% average — real purchasing power is set to rise, supporting stronger household addition, pharmaceuticals offer selective opportunities. Several names in the sector are trading at attractive valuations, with healthy demand outlooks both domestically and in export terms of new sectors - India's evolving stock markets present compelling opportunities across innovation-driven sectors that could reshape long-term investment financial services, fintech platforms have doubled their active client share since December 2020, while a leading insurance technology company saw online policy sales surge 14 times between FY19 and rapid adoption of UPI has transformed payment systems, expanding access and enabling a more inclusive financial commerce is also experiencing remarkable growth, with gross merchandise value projected to rise sixfold by FY27, reflecting changing consumer preferences and demand for hyperlocal automobiles, design innovation is helping leading passenger vehicle manufacturers gain market share and enhance customer India's steadily rising defence capital expenditure highlights opportunities in cost-effective, indigenous production as the sector innovation has driven economic growth, and these emerging segments demonstrate how India's dynamic innovation ecosystem can reward forward-looking investors seeking sustainable, long-term value while participating in a transformative growth story. Q) Geopolitical concerns weighed on crude oil in the past few weeks. How do you see crude oil moving in the near future and what could be the possible impact on earnings and GDP growth? A) Consensus forecasts place Brent crude in a $60–70/bbl range by late 2025, with WTI slightly lower. Barring a major shock, most analysts see prices trending modestly lower as supply remains adequate and global demand growth geopolitical risks — particularly around Middle Eastern chokepoints — could still push prices well above India, a stable or softer crude trajectory is supportive. Lower oil prices help manage the current account, reduce subsidy burdens, and keep inflation in check, thereby boosting consumer sentiment and real purchasing the corporate side, cheaper crude benefits margin profiles for energy-intensive sectors such as paints, chemicals, transport, and cement. Broadly, lower oil acts like a tax cut for the economy, freeing up resources to sustain GDP growth absent a fresh geopolitical flare-up, we see crude oil as more likely to support than undermine India's growth and corporate earnings over the next two quarters. Q) In terms of valuation comfort – which sectors are on your radar? A) In the current environment, we see attractive valuation opportunities in domestic consumption and pharmaceuticals. India's strong high-frequency indicators and its position as the world's fastest-growing major economy make consumption-driven businesses especially pharma, several companies are trading at reasonable valuations with promising near-term growth prospects, supported by robust demand and favourable export broadly, the market appears to be transitioning from a macro-driven rally to a stock picker's phase. Correlations across sectors have been unusually high in recent quarters, but we believe we are approaching a turning point where company-specific fundamentals will take precedenceIn this scenario, bottom-up approaches — including focused mutual funds and other concentrated strategies — are well-placed to capture opportunities. Q) How are FIIs looking at India amid falling interest rates globally? A) As of 28 June 2025, Foreign Institutional Investors have recorded total equity outflows of around ₹1.23 lakh crore year-to-date, driven by global volatility and profit-booking earlier in the the tide has clearly begun to turn. FIIs have been net buyers for four consecutive months — March, April, May, and June — with June alone seeing net inflows of approximately ₹8,320 crore as of June total, FIIs have brought in about ₹23,000 crore across these four months, signaling renewed FIIs are favouring financials, energy, and select consumption plays, while remaining cautious on IT, auto, and FMCG due to global growth uncertainties and relatively rich market flows have moderated after a record ₹1.24 trillion of FPI purchases last year, as higher US yields and a firmer dollar weigh on India's robust macro fundamentals — 7%+ GDP growth, contained inflation, and stable policy — remain a powerful global strategists like Morgan Stanley, JP Morgan, and Goldman Sachs maintaining an 'overweight' on India and earnings growth forecasts of 14–17% through FY27, the improving FII trend should continue into H2 2025. Q) If someone plans to allocate say Rs 10 lakh (30-40 years) in 2H2025 – should they put fresh money to work? What is the ideal asset allocation? A) If someone aged between 30–40 is looking to invest Rs 10 lakh in the second half of 2025, it would generally make sense to deploy the funds rather than waiting on the a long investment horizon (20+ years until retirement, for example), equities tend to outperform other assets, and delaying can mean missing out on compounding.A reasonable asset allocation could be:• 70–80% in equities — spread across large-cap, flexicap, and some mid/small-cap funds to balance stability and growth• 20–30% in debt — such as high-quality debt funds, PPF, or tax-saving bonds to provide stability and liquidityIf the investor is new to equity investing, a staggered approach (for example, investing over 3–6 months via STP/SIP) can help manage market risk appetite, future financial commitments, and emergency reserves should be considered before finalising the allocation. Q) How is the rate trajectory looking from the RBI? Do you think the front-loaded 50 bps cut was enough to boost consumption? A) The RBI has shifted decisively toward an accommodative stance in 2025, cutting the repo rate by 100 basis points to 5.5% and announcing a 100 basis points CRR reduction from 4.5% to 3.5%, phased from front-loaded 50 bps repo cut was aimed at swiftly reducing borrowing costs for banks, which should translate into cheaper loans for households and businesses, encouraging lowering the CRR will release about ₹2.5 lakh crore into the banking system, expanding credit flow. With inflation relatively low, purchasing power is preserved, further supporting RBI's strong pivot recognises that consumption will be the key driver of economic growth in the near term, especially as investment may remain subdued due to policy uncertainties. While the 50-bps front-loaded cut should help, its impact will likely build gradually as confidence improves, and credit transmission strengthens over the coming quarters. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
04-07-2025
- Business
- Time of India
ETMarkets Smart Talk: Deploy, don't delay! Arun Patel advises long-term investors to stay invested in 2H2025
As market volatility tapers and India's economic fundamentals remain robust, long-term investors should stay the course rather than wait on the sidelines, says Arun Patel, Founder & Partner at Arunasset Investment Services, in this edition of ETMarkets Smart Talk. In a wide-ranging conversation, Patel shares his views on the market outlook for the second half of 2025, why domestic consumption remains a key theme, and how falling inflation and an accommodative RBI stance are creating a favourable environment for equities. He also outlines ideal asset allocation strategies for investors with a multi-decade horizon and highlights sectors like pharma, fintech, and quick commerce as emerging opportunities worth tracking. Edited Excerpts - Q) Thanks for taking the time out. We closed May on a high not but witnessed some volatility in June – is it geopolitical concerns weighing on sentiment? A) Thank you so much for having me. While June did see some volatility driven by geopolitical tensions, particularly the Israel–Iran conflict and worries about a wider regional escalation, these concerns turned out to be short-lived. A ceasefire held, and crucially, Iran refrained from blocking the Strait of Hormuz, likely recognising that such a move would have punished Asian economies more than its intended targets of Israel and the US. As a result, oil prices have returned to levels seen before the initial strikes. On the domestic front, India's macro fundamentals remain highly supportive. GDP for January–March rose to 7.4%, beating estimates, while May CPI eased to 2.82%. Forex reserves are near $700 billion, among the world's highest. Q4 FY25 saw a modest earnings recovery compared to the previous two quarters, with the BSE 500 delivering high single-digit revenue growth and around 10% net profit growth. Notably, excluding oil and gas, the broader BSE 500 universe recorded strong underlying PAT growth of about 12–14%, supported by healthy performance in pharma and consumer sectors. Q) As we are about to end 1H2025, what are your expectations or assumptions for the rest of the year? A) As we move into the second half of 2025, we expect consumption to drive growth. With inflation cooling, real purchasing power should rise meaningfully. The RBI's June 2025 policy statement revised its FY 2025–26 inflation forecast down to 3.7% from 4.0%, and we believe actual inflation could average even lower, around 2.5% over the next six months. This creates space for further monetary support, enhancing household spending capacity. However, private investment may continue to lag, particularly with global FDI flows subdued amid persistent policy uncertainty in key economies. Shifting regulations and trade frictions could discourage large investment decisions. Fortunately, India's domestic investor base has shown resilience, with steady flows even through recent volatility, providing a structural cushion for markets. We see the second half as a 'stock pickers' market,' where company-specific fundamentals will matter more than broad macro narratives. Investors should be nimble, focusing on quality businesses across all market caps. Overall, given strong domestic demand and policy stability, we expect Indian equities to surpass last year's highs before the year ends. Q) Are there any new or existing themes that are likely to do well in 2H2025? A) We believe domestic consumption will remain a standout theme in the second half of 2025. With inflation easing — the RBI now projects retail inflation at 3.7% for FY 2025–26, and we see the potential for an even lower 2.5% average — real purchasing power is set to rise, supporting stronger household spending. In addition, pharmaceuticals offer selective opportunities. Several names in the sector are trading at attractive valuations, with healthy demand outlooks both domestically and in export markets. In terms of new sectors - India's evolving stock markets present compelling opportunities across innovation-driven sectors that could reshape long-term investment strategies. In financial services, fintech platforms have doubled their active client share since December 2020, while a leading insurance technology company saw online policy sales surge 14 times between FY19 and FY25. The rapid adoption of UPI has transformed payment systems, expanding access and enabling a more inclusive financial ecosystem. Quick commerce is also experiencing remarkable growth, with gross merchandise value projected to rise sixfold by FY27, reflecting changing consumer preferences and demand for hyperlocal delivery. In automobiles, design innovation is helping leading passenger vehicle manufacturers gain market share and enhance customer loyalty. Meanwhile, India's steadily rising defence capital expenditure highlights opportunities in cost-effective, indigenous production as the sector modernises. Historically, innovation has driven economic growth, and these emerging segments demonstrate how India's dynamic innovation ecosystem can reward forward-looking investors seeking sustainable, long-term value while participating in a transformative growth story. Q) Geopolitical concerns weighed on crude oil in the past few weeks. How do you see crude oil moving in the near future and what could be the possible impact on earnings and GDP growth? A) Consensus forecasts place Brent crude in a $60–70/bbl range by late 2025, with WTI slightly lower. Barring a major shock, most analysts see prices trending modestly lower as supply remains adequate and global demand growth softens. However, geopolitical risks — particularly around Middle Eastern chokepoints — could still push prices well above consensus. For India, a stable or softer crude trajectory is supportive. Lower oil prices help manage the current account, reduce subsidy burdens, and keep inflation in check, thereby boosting consumer sentiment and real purchasing power. On the corporate side, cheaper crude benefits margin profiles for energy-intensive sectors such as paints, chemicals, transport, and cement. Broadly, lower oil acts like a tax cut for the economy, freeing up resources to sustain GDP growth momentum. Overall, absent a fresh geopolitical flare-up, we see crude oil as more likely to support than undermine India's growth and corporate earnings over the next two quarters. Q) In terms of valuation comfort – which sectors are on your radar? A) In the current environment, we see attractive valuation opportunities in domestic consumption and pharmaceuticals. India's strong high-frequency indicators and its position as the world's fastest-growing major economy make consumption-driven businesses especially compelling. Within pharma, several companies are trading at reasonable valuations with promising near-term growth prospects, supported by robust demand and favourable export opportunities. More broadly, the market appears to be transitioning from a macro-driven rally to a stock picker's phase. Correlations across sectors have been unusually high in recent quarters, but we believe we are approaching a turning point where company-specific fundamentals will take precedence In this scenario, bottom-up approaches — including focused mutual funds and other concentrated strategies — are well-placed to capture opportunities. Q) How are FIIs looking at India amid falling interest rates globally? A) As of 28 June 2025, Foreign Institutional Investors have recorded total equity outflows of around ₹1.23 lakh crore year-to-date, driven by global volatility and profit-booking earlier in the year. However, the tide has clearly begun to turn. FIIs have been net buyers for four consecutive months — March, April, May, and June — with June alone seeing net inflows of approximately ₹8,320 crore as of June 28. In total, FIIs have brought in about ₹23,000 crore across these four months, signaling renewed confidence. Sectorally, FIIs are favouring financials, energy, and select consumption plays, while remaining cautious on IT, auto, and FMCG due to global growth uncertainties and relatively rich valuations. Debt market flows have moderated after a record ₹1.24 trillion of FPI purchases last year, as higher US yields and a firmer dollar weigh on appetite. Nevertheless, India's robust macro fundamentals — 7%+ GDP growth, contained inflation, and stable policy — remain a powerful draw. With global strategists like Morgan Stanley, JP Morgan, and Goldman Sachs maintaining an 'overweight' on India and earnings growth forecasts of 14–17% through FY27, the improving FII trend should continue into H2 2025. Q) If someone plans to allocate say Rs 10 lakh (30-40 years) in 2H2025 – should they put fresh money to work? What is the ideal asset allocation? A) If someone aged between 30–40 is looking to invest Rs 10 lakh in the second half of 2025, it would generally make sense to deploy the funds rather than waiting on the sidelines. Over a long investment horizon (20+ years until retirement, for example), equities tend to outperform other assets, and delaying can mean missing out on compounding. A reasonable asset allocation could be: • 70–80% in equities — spread across large-cap, flexicap, and some mid/small-cap funds to balance stability and growth • 20–30% in debt — such as high-quality debt funds, PPF, or tax-saving bonds to provide stability and liquidity If the investor is new to equity investing, a staggered approach (for example, investing over 3–6 months via STP/SIP) can help manage market volatility. Finally, risk appetite, future financial commitments, and emergency reserves should be considered before finalising the allocation. Q) How is the rate trajectory looking from the RBI? Do you think the front-loaded 50 bps cut was enough to boost consumption? A) The RBI has shifted decisively toward an accommodative stance in 2025, cutting the repo rate by 100 basis points to 5.5% and announcing a 100 basis points CRR reduction from 4.5% to 3.5%, phased from September. The front-loaded 50 bps repo cut was aimed at swiftly reducing borrowing costs for banks, which should translate into cheaper loans for households and businesses, encouraging spending. Meanwhile, lowering the CRR will release about ₹2.5 lakh crore into the banking system, expanding credit flow. With inflation relatively low, purchasing power is preserved, further supporting consumption. The RBI's strong pivot recognises that consumption will be the key driver of economic growth in the near term, especially as investment may remain subdued due to policy uncertainties. While the 50-bps front-loaded cut should help, its impact will likely build gradually as confidence improves, and credit transmission strengthens over the coming quarters.
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Business Standard
23-06-2025
- Business
- Business Standard
Blend core SIP strategy with dip-buying for tactical market gains
Trading volumes in exchange-traded funds (ETFs) on the National Stock Exchange (NSE) typically spike when the Nifty drops more than 1 per cent, according to media reports. This indicates that savvy investors use such declines as buying opportunities. ETF advantage ETFs are well-suited for dip-buying as they offer intraday liquidity. 'Unlike mutual funds, which are priced only at day-end, ETFs trade in real time, allowing investors to act immediately during sharp intraday declines,' says Arun Patel, founder and partner, Arunasset Investment Services. ETFs have low expense ratios and don't have an exit load. They also provide diversification so that investors don't have to bet on individual stocks. Upside of buying the dip Buying after a market fall enables investors to acquire assets at more attractive valuations. 'Investors get more value for the same investment. It can help lower their average cost of holdings,' says Patel. Behaviourally, the strategy converts volatility into opportunity. 'If done calmly, dip-buying can enhance long-term returns,' says Sanjeev Govila, certified financial planner and chief executive officer, Hum Fauji Initiatives. Further dips possible after buying Dip-buying during bear phases or early in a sell-off can backfire. 'It often amounts to catching a falling knife. Investors may misread temporary bounces or technical signals, only to face deeper declines,' says Patel. 'Markets can continue declining after purchase, testing the investor's patience,' says Govila. If the trend persists, many investors tend to throw in the towel and exit at a loss. Deploying too early leaves investors without dry powder for better opportunities that may come later during the downturn. Evaluate the context Assessing the context is critical. 'Dip-buying is most effective when you can anticipate a turning point — when central banks or governments are likely to step in with supportive measures like rate cuts, liquidity infusions, or fiscal stimulus that may help stabilise the market,' says Patel. Govila suggests the 5-10-15 rule. 'A 5 per cent decline is usually noise, 10 per cent declines deserve attention, while 15 per cent plus declines often present genuine opportunities,' he says. Deployment strategy Avoid overcommitting by setting up a dedicated 'dip fund'. 'Create a separate pool of, say, 5–10 per cent of your total equity allocation, earmarked for such opportunities,' says Govila. Staggered buying reduces regret and improves cost-efficiency. 'Follow the 25-50-25 strategy: Deploy 25 per cent on the first significant decline, 50 per cent if the market falls further, and reserve 25 per cent for extreme scenarios,' he says. Rule-based triggers tied to valuations or index levels can help avoid emotional decisions. Investors should write down their investment rationale before placing such bets. 'Having a written plan, a pre-defined buying ladder, and a long-term mindset rooted in asset quality helps build conviction,' says Ram Medury, founder and chief executive officer, Maxiom Wealth. Be prepared for a long wait Dip-buying can at times require patience. If the dip occurs during a strong uptrend or is triggered by a temporary change in sentiment, recovery can come within months. After the taper tantrum of 2013, the market rebounded strongly within a few quarters as macro stability returned. The Covid-19 crash of March 2020 also saw a swift rebound within a year. If the decline is part of a broader correction or triggered by macroeconomic stress, the wait can be longer. After the 2008 global financial crisis, Indian equities needed nearly two years to recover. 'Historically, markets have taken 12–30 months to recover fully after meaningful corrections. And sector-focused dips may take longer to play out than broad-market dips,' adds Govila. Combine with SIPs Those who buy on dips should not abandon systematic investment plans (SIPs). 'SIP should be the core strategy for retail investors because it is systematic, discipline-driven, and avoids the emotional pitfalls of market timing,' says Medury. SIPs should not be paused during volatile phases. 'Monthly savings done through SIPs provide the power of compounding if done continuously for the long run,' says Swati Saxena, founder and chief executive officer, 4Thoughts Finance. It is best to integrate the two approaches. 'SIPs will provide the benefit of rupee-cost averaging and you can also do opportunistic buying during market downturns,' says Abhishek Kumar, Sebi-registered investment adviser and founder, Saxena suggests routing monthly savings through SIPs and lump-sum investing through dip investing. Key mistakes to avoid Experts say that not every 5 per cent correction is a buying opportunity. Sometimes, those corrections are justified — by lower growth, tighter liquidity, or global shocks. 'Buying prematurely in a falling knife scenario (for example, smallcaps in 2018) can hurt,' says Medury. He suggests using valuation indicators (like P/E relative to historical averages), macro cues (like crude oil spike, GDP growth), and technical support zones to assess the depth of the downturn. Do not engage in dip-buying using leverage, emergency funds, or money needed for short-term goals. Placing heavy bets on a specific sector can also backfire.
