The sell-off also wiped out nearly ₹20 lakh crore in market capitalisation of BSE-listed companies this week, raising concerns over whether the current period of weakness could extend further.
Against this backdrop, market experts said investors should focus on asset allocation, bottom-up stock selection and sectors where valuations and earnings prospects remain supportive, while technical indicators point to the possibility of a sharp relief rally.
Pramod Gubbi: Market favours bottom-up stock picking
Pramod Gubbi, Co-Founder of Marcellus Investment Managers, said the current market environment is better suited to bottom-up stock picking than broad-based investing. He said investors should focus on asset allocation across equities, fixed income and commodities rather than trying to predict when the broader market will resume its uptrend.
Gubbi said even when the overall market remains flat, individual stocks and sectors can deliver strong returns. He described the current environment as a bottom-up market, unlike the broad-based beta-driven phase seen between 2020 and 2024.
“So this is more of a bottom-up market as opposed to what we saw between, say, 2020 and 2024, which was a very broad-based beta market,” Gubbi said in an interview with CNBC-TV18.
For retail investors, Gubbi said asset allocation should be based on individual goals and risk appetite rather than follow a fixed formula.
Gubbi said the commonly used 60:40 allocation between equities and fixed income misses an important component in the current global market environment — real assets or commodities. He said a broad allocation of 60% equities, 20% fixed income and 20% commodities could suit investors with a moderate risk profile, while stressing that individual circumstances would require different allocations.
“More importantly, risk appetite is a very critical input towards asset allocation,” he said.
Gubbi also stressed the importance of combining assets that are not correlated with each other. He said this can help keep portfolio volatility low while allowing investors to maintain long-term returns through systematic rebalancing.
On the debt side, Gubbi said the appropriate approach depends on the investor’s goal and investment horizon. For emergency funds with a horizon of around six months, he said arbitrage funds could provide an option from a taxation perspective. For investors with a two- to three-year horizon, he said other options could allow them to play the yield curve and address taxation considerations.
Gubbi also said Indian investors can access global ETFs through a global brokerage account under the Liberalised Remittance Scheme. He said ETFs provide a way to diversify across asset classes, themes and geographies without having to select individual securities.
“ETFs provide a great way to diversify across asset classes, across thematics, across geographies,” Gubbi said.
On sectors, Gubbi said Marcellus remains constructive on hospitals but selective in its approach. On insurance, he said regulatory risks need to be assessed, while the opportunity could shift from insurance distribution to manufacturing.
“We could see value capture shifting from distribution to manufacturing, and that’s where the real opportunity for investing in insurance stocks is,” he said.
Rahul Sharma: Oversold indicators point to possible relief rally
Rahul Sharma, Director & Head of Technical, Derivatives at JM Financial Services, said multiple technical and positioning indicators suggest the market is heavily oversold.
“Multiple indicators are suggesting that markets are heavily oversold be it the RSI, be it the India VIX which is at a four-month high, be it a put-call ratio, be it the long-short ratio of FIIs on the derivative side,” Sharma said.
He said such extreme readings have historically been followed by sharp market rebounds. Sharma identified the 22,000-22,182 range on the Nifty as a key zone from where he expects a relief rally.
According to Sharma, 22,182 was the previous low during the latest correction, while 22,000 represents a psychological level for the index.
“This is the eighth consecutive week that we have sold into. It hasn’t happened since a very long time,” Sharma said, adding that he would not be surprised to see a sharp bounce from next week onwards.
He said such a rebound could translate into a rally of around 500-800 points on the Nifty, and advised clients to “hold on to their horses”.
Deven Choksey: Capitulation could be forming a panic bottom
Deven Choksey of DRChoksey Finserv said the market is witnessing a typical capitulation, with multiple adverse factors operating simultaneously.
“Capitulation of a very typical nature is happening with all adverse factors operating into the market place,” Choksey said.
He said even some good-quality stocks were being affected because positions were being forcibly sold, resulting in what he described as collateral damage.
According to Choksey, this could lead to the formation of a panic bottom in the market.
“That’s the reason for which the markets are supposed to make the panic bottom, in all likelihood, it has made or it is likely to be making in due course of time now,” he said.
Choksey said this could create opportunities in some good-quality stocks where the underlying fundamentals remain unaffected by the selling pressure.
He said some large-cap companies have remained relatively strong, with downside risks potentially protected at current market prices. However, he identified short selling through the derivatives market by foreign portfolio investors as a key factor affecting large-cap stocks.
“If any corrective course is taken by the regulator in this area, quite possible that the market will turn back and turn back very smartly,” Choksey said.
He said he was watching 21,800 on the downside, with 22,800-23,200 as the upside range.
Pankaj Tibrewal: Consumer-facing sectors, financials in focus
Pankaj Tibrewal, Founder & CIO of IKIGAI Asset Manager, said he is closely watching consumer durables, home improvement and consumer discretionary businesses.
“We are looking at the entire consumer durable, home improvement, and consumer discretionary sectors very closely because after a long time, B2C businesses have started to look attractive,” Tibrewal said.
He said these businesses could become attractive for investors taking a medium- to long-term view, while some B2B businesses have become expensive after pricing in the next three to four years of earnings.
Tibrewal also said financials have started to look attractive, with earnings growth beginning in private sector banks.
“Financials, after a long time, has started to look very attractive with earnings growth starting to begin in the private sector banks and that is one area where one has to be having a very close watch,” he said.
He added that some old market favourites that have fallen back are looking attractive on valuations, creating bottom-up opportunities across sectors.
Tibrewal also highlighted metals and mining as a broad theme he expects to perform strongly, along with agro commodities.
“I think we are going to see, in our view, a very strong cycle for metal and mining and along with that agro commodities,” he said.
