Geopolitical tensions, like the ongoing Iran-Israel conflict, are casting a shadow over global markets. While India’s direct trade with these nations is limited, potential disruptions to vital shipping lanes, such as the Strait of Hormuz, could push crude oil prices higher, leading to inflation and a weaker rupee. Prabhakar Kudva, Director and Principal Officer-Portfolio Management Services at Samvitti Capital, suggests that FY25-26 will likely be a year of market consolidation, with subdued returns expected as the market digests recent gains and realigns valuations. He anticipates a more significant upward movement to begin around Q4 FY26.
Despite this cautious outlook, High Net Worth Individuals (HNIs) with Rs 1 crore can still build a robust portfolio through strategic allocation.
Crafting Your Portfolio Amidst Volatility
For HNIs investing Rs 1 crore, the key to portfolio construction lies in individual risk appetite. There’s no one-size-fits-all solution:
- Conservative Investors: Should limit their equity exposure to 20-25%. The remaining capital can be diversified into various debt instruments and precious metals like gold, prioritizing capital preservation and stability during turbulent times.
- Aggressive Investors: Can consider a higher equity allocation of 60-75%. This should be balanced with strategic investments in debt and precious metals to provide essential diversification and stability.
The Midcap and Smallcap Rally: What’s Driving It?
The BSE Midcap and Smallcap indices have seen a strong rebound, rallying over 10% in FY26. This follows a correction between October 2024 and March 2025, where these segments, and the broader market, saw declines of 15-30%. The previous dip was primarily due to:
- Slower-than-expected GDP growth.
- Global “tariff tantrums” affecting trade sentiment.
- Fallout from the Indo-Pak conflict.
As these pressures ease, market confidence is returning, fueling the current rally from those oversold lows.
Samvitti Capital’s Proven PMS Strategies
Samvitti Capital offers two successful Portfolio Management Services (PMS) strategies:
- Aggressive Growth Strategy: This strategy has delivered over 25% annualized returns in the past five years. Its success stems from a disciplined approach of carefully selecting stocks with strong earnings tailwinds. They pinpoint companies boasting robust growth drivers, strong competitive positions, and superior management, aiming for substantial earnings expansion. Their proprietary Quant model, “Sattva,” powers this earnings data analysis.
- Long Term Growth Strategy: With over 20% annualized returns in the past five years, this strategy mirrors the Aggressive Growth approach but focuses on large mid-cap and large-cap companies. This provides more stable, yet still substantial, growth by investing in established market leaders and fundamentally strong businesses that demonstrate consistent earnings visibility and often greater liquidity.
Why Choose PMS Over Mutual Funds?
While mutual funds are excellent for broad wealth creation, offering standardized, moderate risk-reward products, PMS provides differentiated, bespoke strategies designed for superior, alpha-driven returns. The primary goal of a PMS is to demonstrably outperform the average of top-quartile mutual funds, offering specialized approaches tailored to investors.
High-Potential Sectors for the Next Three Years
Prabhakar Kudva identifies several sectors and themes with significant growth potential over the next three years:
- Power: Driven by India’s soaring energy demand, the strong push towards renewable energy infrastructure, and the anticipated power demands from AI infrastructure.
- CDMO/API/Formulations: Benefiting from global supply chain diversification and India’s increasing prominence as a pharmaceutical manufacturing hub. The upcoming patent expiry of GLP-1 drugs offers a substantial growth opportunity.
- Wealth Management: Poised for growth due to rising disposable incomes and the increasing financialization of savings in India.
- Textiles: Experiencing a resurgence thanks to government incentives, robust domestic consumption, and shifts in global sourcing driven by Free Trade Agreements (FTAs).
India Inc.’s Health in FY25: A Look Back
Overall, the FY25 results indicate a well-recovered growth trajectory for India Inc.
- Positives: Resilient domestic demand (especially in the latter half of the year), strong performance from domestic-oriented sectors like capital goods, and improved corporate profitability.
- Negatives: Growth moderation compared to the previous year, with export-oriented sectors still facing global headwinds due to tariff uncertainties.
Real Estate Rally: Sustainable Momentum?
The strong performance of real estate stocks in FY26 is fueled by supportive government policies, anticipated interest rate reductions boosting affordability, and sustained demand. While these drivers are currently robust, Kudva advises caution. The real estate sector is inherently cyclical, lumpy, and unpredictable. Its long-term sustainability hinges on continued favorable macroeconomic and regulatory conditions.
What’s your current investment focus given the evolving market landscape?