ETMarkets Smart Talk: Have Rs 10 lakh to invest in 2H2025? Anil Rego recommends 65:25:10 asset allocation mix

Time of India

27-06-2025

As global markets navigate
geopolitical tensions
, shifting interest rate cycles, and lingering
inflation
concerns,
investors
are seeking clarity on how to position their portfolios for the second half of 2025.
In this edition of ETMarkets Smart Talk, we spoke with
Anil Rego
, Managing Director and Chief Investment Officer at Right Horizons PMS, to decode the road ahead.
With India continuing to stand out amid
global uncertainty
— thanks to strong
GDP growth
, cooling inflation, and policy continuity — Rego believes now is an opportune time to gradually deploy fresh capital.
For long-term investors with a Rs 10 lakh corpus, he suggests a balanced 65:25:10 allocation across equities, debt, and gold, tailored for a risk-averse profile.
In this exclusive conversation, Rego shares his insights on market outlook, sector opportunities, interest rate dynamics, and the right strategy to navigate the evolving macro landscape in 2H2025. Edited Excerpts –
Q) We closed May on a high note but witnessed some volatility in June – is it geopolitical concerns weighing on sentiment?
A) Volatility in June after can be largely attributed to geopolitical concerns and global macro uncertainties, among other factors.
The ongoing Israel-Gaza and Israel-Hezbollah escalations have rekindled fears of a broader conflict, which can disrupt oil supply routes and global trade flows.
The Fed's cautious stance on rate cuts has firmed up the dollar and pressured EM flows. While the world faces geopolitical tensions, slow economic growth, high inflation, and elevated interest rates, India tells a different story.
The nation is witnessing solid GDP growth, a steady currency, easing inflation and interest rates, and strong corporate earnings.
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Volatility may persist in the near term due to global cues, but structural domestic drivers (capex push, consumption revival, earnings growth) remain intact.
India's nominal GDP expanded by 10.8% yoy in Q4 FY25, the fastest pace in the last four quarters, leading to an overall growth of 9.8% for the full fiscal year.
This strong performance underscores improving domestic macroeconomic conditions, which are expected to persist and continue supporting corporate earnings.
Q) As we are about to end 1H2025, what are your expectations or assumptions for the rest of the year?
A) The outlook appears cautiously optimistic. On the macro front, India continues to stand out with stable GDP growth around 6.5%, well-contained inflation, and policy continuity post-elections.
The RBI has front-loaded 100 bps of rate cuts this year, which should begin transmitting into lower borrowing costs and potentially support consumption and private capex in the coming months.
Global cues will play a major role. If the U.S. Fed were to initiate rate cuts by Q4CY25, it would improve global risk appetite and support foreign inflows into emerging markets like India.
However, geopolitical flashpoints particularly in the Middle East remain key downside risks, especially if crude oil spikes above $90/bbl and disrupts supply chains.
On corporate earnings, sectors like financials, autos, industrials, and consumer discretionary are likely to drive the next leg of growth, while IT and export-oriented businesses may remain range-bound amid global uncertainty.
Overall, 2H2025 is expected to see stable economic momentum, gradual recovery in consumption, and greater market depth supported by both domestic and foreign investors.
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) Crude oil prices have remained relatively low over the past year due to uncertain demand and sufficient supply, which have outweighed the ongoing effects of the Russia-Ukraine war.
However, recent Israeli airstrikes on Iran and Iran's retaliatory actions have reignited concerns, pushing prices upward once again.
While these events pushed Brent crude briefly above $75/bbl, prices remain below the FY22–25 average, suggesting that global supply is still largely intact.
Near-term crude movement will likely be shaped by how the conflict evolves if oil infrastructure or shipping lanes are directly hit, Brent could spike significantly.
From a macro perspective, moderate crude prices are a net positive for India. Every $10/bbl rise in crude can shave 30–40 bps off GDP growth and widen the current account deficit.
On corporate earnings, for upstream companies, higher prices could support earnings. OMCs could face margin pressure if retail prices remain unchanged, while inventory gains may offer temporary relief.
Gas companies may see a negative impact due to rising LNG prices linked to crude. If prices remain range-bound, the impact on India's FY26 GDP and earnings would be manageable.
Q) In terms of valuation comfort – which sectors are on your radar?
A) The corporate profit-to-GDP ratio for Nifty 500 held steady year-on-year at a 17-year high of 4.7% in FY25, largely supported by a strong 10.5% growth in corporate profits which was reinforced by a solid 9.8% rise in GDP during the same period.
The strong performance in GDP growth in Q4 underscores improving domestic macroeconomic conditions, which is expected to persist and continue supporting corporate earnings.
Further corporate earnings are projected to outpace GDP growth. We remain optimistic on sectors with strong structural tailwinds, where policy support, demand visibility, and earnings momentum align to create compelling long-term opportunities.
Capital Goods & Industrials
India's Capital Goods and Industrial sectors are riding a structural upcycle, supported by the government's infrastructure push and private capex revival. The electrical equipment market is projected to more than double by 2027, while the construction equipment segment is poised to grow at a 15% CAGR. This growth is backed by strong order books, execution tailwinds, and continued momentum in railways, power, and defense. Valuations, particularly in mid-cap names, remain attractive relative to growth prospects. With operating leverage kicking in and policy continuity post-elections, this sector offers a strong combination of earnings visibility and valuation comfort, making it a core long-term theme.
Consumer Discretionary
India's consumer discretionary sector continues to benefit from robust urban demand, premiumization, and formalization. Despite rural softness and inflationary pressures, segments like value fashion, QSRs, and jewellery are witnessing strong traction. With consumer spending projected to reach USD 4.3 trillion by 2030, India's aspirational consumption story is intact. Easy credit, digital access, and expanding middle-class income underpin this trend. While valuations for large caps have rerated, opportunities exist in niche mid-cap players with strong brand equity and efficient cost structures. The sector remains structurally sound, but stock selection is key amid divergent growth trajectories across sub-segments.
Wealth Management
The wealth management sector in India is undergoing a significant transformation, driven by a sharp rise in HNI and UHNI wealth. With financial assets projected to grow from USD 1.2 trillion in 2023 to USD 2.2 trillion by 2028, and only 15% of this wealth professionally managed, the runway for growth is immense. Regulatory changes like the revised income tax slabs also support financial product adoption. The sector offers structural tailwinds, though valuations vary. Companies with scalable digital platforms, high-retention advisory models, and diversified product suites stand to benefit the most. This is a long-term theme with potential for strong compounding.
Q) How are FIIs looking at India amid falling interest rates globally?
A) FIIs are turning constructive on India amid falling global interest rates. As central banks like the move toward easing, India stands out with its stable macroeconomic environment and robust GDP growth. The RBI's front-loaded rate cuts and improved liquidity conditions have further strengthened the investment case.
Compared to other emerging markets, India offers a compelling combination of policy continuity, structural reform momentum, and resilient corporate earnings. FIIs also value India's demographic strength and rising digital and consumption-driven economy.
With global bond yields softening and risk appetite improving, India is regaining favour as a long-term allocation. While geopolitical risks remain a watch point, India's relative insulation, stable currency, and strong domestic flows provide FIIs a dependable and scalable growth story in the current global macro cycle.
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) It is a favorable opportunity to gradually deploy fresh capital, especially given the evolving macro environment and supportive policy signals.
The RBI's front-loaded rate cuts, a benign inflation outlook, and the prospect of stable real interest rates indicate a shift toward a growth-supportive stance.
Moreover, as the global monetary cycle begins easing and domestic capex and consumption cycles gain traction, long-term investors can find attractive entry points across asset classes.
A staggered deployment is recommended with asset Allocation assuming a risk averse client with exposure towards Equity/Debt/Gold at 65%/25%/10% respectively.
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's rate trajectory has taken a decisive turn with a surprise front-loaded 50 bps repo rate cut in June 2025, bringing the policy rate down to 5.5%. This move followed two earlier 25 bps cuts since February, marking a cumulative easing of 100 bps in a short span.
The RBI also announced a 100-bps cut in the CRR to 3%, aimed at injecting ₹2.5 trillion of liquidity into the banking system by December 2025.
While the 50-bps front-loaded cut is a strong and timely policy signal, its impact on consumption, especially private and rural demand, may be limited in the short run.
Lower lending rates and improved liquidity could support credit flow, ease borrowing costs, and boost urban discretionary segments like housing and auto.
It also strengthens monetary transmission and may lift business sentiment, aiding capex recovery. A rate cut only helps in stimulating demand to drive a broad-based consumption rebound.