Should you keep investing? Here's what market data says
ADVERTISEMENT Q. Let's begin with the current sentiment in Indian markets. Despite global uncertainties, Indian equities continue to show resilience. What are the key factors driving this strength?
Chirag Muni: The Indian market's strength lies in its robust macroeconomic foundation. In the short term, markets may react to sentiment, but over the long run, they're driven by economic fundamentals, and here, India stands out.
We closed last year with a GDP growth of 6.5%, and for this year we're expecting around 6.6%. That keeps India among the fastest-growing major economies globally. Inflation has also cooled—CPI dropped to 2.82% in May from 3.16% in April, giving the RBI room to cut rates by nearly 100 basis points this year. That's good news for corporate margins and consumption.
Fiscal data is equally strong. The fiscal deficit has been revised to 4.8%, and the RBI's ₹2.7 lakh crore dividend to the government helps strengthen our balance sheet further. GST collections in May crossed ₹2 lakh crore, a 16.5% YoY rise, and direct tax collections have gone up 14.5% in the first two months. All indicators are pointing toward solid economic momentum.
Q. That sounds like a strong foundation. How are Indian market valuations positioned right now?
Chirag: We're fairly valued with room for upside. The Nifty currently trades around 25,000. Historically, the one-year forward average PE has been around 20x. Even conservatively assuming 20–20.5x on forward EPS, Nifty should be close to 26,000. So we're looking at a 4–5% 'valuation gap' or negative froth—both in largecap and midcap spaces. Our one-year return estimate for Nifty is 11–13%, in line with nominal GDP. Midcaps and large & midcaps could deliver 18–20%.
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Q. Given these fundamentals, how should investors position their portfolios right now?
Chirag: This is a great time to stay disciplined and invest with a long-term view.
Maintain 70–80% equity allocation if your horizon is 4–5 years.
ADVERTISEMENT Keep 20–30% in debt for stability.Continue your SIPs—don't let short-term noise distract you.
ADVERTISEMENT Diversify:50–55% in largecaps,
ADVERTISEMENT Balance between mid and smallcaps.Equity remains the best-performing asset class over the long term. Stick to your asset allocation and review it regularly.
Q. Could you suggest specific mutual funds for those looking to invest across categories?
Chirag: Absolutely. Here's a diversified mix that has historically delivered strong risk-adjusted returns: Multicap: Canara Robeco Multicap FundFlexicap: HDFC Flexicap FundLarge & Midcap: SBI Large & Midcap FundMidcap: Kotak Emerging Equity FundSmallcap: Invesco Smallcap FundThese funds offer good diversification and can be bundled into a balanced, long-term portfolio.Disclaimer: Please note that these are not recommendations. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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