ETMarkets Smart Talk | Balance portfolios, avoid midcap froth: Mirae Asset ShareKhan's Somil Mehta

Amid heightened global volatility driven by geopolitical tensions, rising crude oil prices, and cautious foreign investor flows, markets have entered a phase of uncertainty that is testing investor discipline. Somil Mehta, Head of Retail Research at Mirae Asset ShareKhan, believes that while near-term risks remain, India's structural growth story continues to provide a strong foundation. In an interaction with Kshitij Anand of ETMarkets, he advises investors, especially those in the 30-40 age group, to maintain balanced portfolios, focus on quality large-cap names and structurally strong sectors, and avoid chasing overvalued mid- and small-cap stocks. Mehta also underscores the importance of staying disciplined and not reacting emotionally to short-term market movements. Edited excerpts: A) March volatility reflects a mix of global factors including geopolitical tensions, rising crude oil prices, and cautious foreign investor flows. While markets may remain weak in the near term, India's domestic growth story remains intact. Corporate earnings growth, strong domestic liquidity, and government capex continue to support markets. A) The IT sector has corrected significantly due to concerns around artificial intelligence (AI) disruption and slower global technology spending. However, this correction has also brought valuations to more reasonable levels. Apart from information technology (IT), sectors like defence, banking, capital goods, and pharma are looking attractive. Defence and capital goods benefit from strong government spending, while banking continues to see steady credit growth. The pharma sector also provides stability during global uncertainty, which makes some of these sectors relatively attractive. A) GOOD: The good is India's strong domestic growth, government capex push, and steady domestic liquidity through mutual funds and SIPs. BAD: The bad is rising global uncertainty, higher crude oil prices, and continued foreign portfolio investor (FPI) selling. UGLY: The ugly could emerge if geopolitical tensions escalate further, pushing oil prices sharply higher and increasing inflationary pressures. However, strong domestic demand and policy stability continue to provide a cushion for Indian markets in the medium term. A) Foreign portfolio investors (FPIs) have remained cautious due to global risk factors such as interest rates, currency volatility, and geopolitical tensions. At the same time, India opening certain sectors for foreign direct investment (FDI) could bring long-term capital into the economy. While portfolio flows may remain volatile, long-term investments through FDI can support manufacturing, infrastructure, and technology sectors, which strengthens India's structural growth story over time. A) The rupee has been under pressure mainly due to higher crude oil prices, global dollar strength, and foreign investor outflows. If crude prices remain elevated, the rupee could continue to face short-term pressure. A) If crude oil prices sustain above $100 per barrel, it could increase India's import bill and widen the current account deficit. Higher fuel costs may also push inflation higher and pressure corporate margins. However, India's diversified energy sourcing and improving macro fundamentals provide some resilience. Markets may react negatively in the short term, but structural growth drivers like infrastructure spending and domestic demand remain supportive. A) Investors in the 30-40 age group should maintain a balanced portfolio with a long-term perspective. A larger allocation can remain in equities, focusing on large-cap companies and structurally strong sectors like banking, defence, and infrastructure. Some allocation to gold can help hedge against global uncertainty. Investors should avoid aggressive exposure to highly valued mid- and small-cap stocks and instead focus on quality companies with strong earnings visibility. A) Investors should avoid reacting emotionally to short-term market volatility. Frequent buying and selling based on headlines often lead to poor investment decisions. It is also important to avoid chasing speculative stocks or heavily leveraged trades. Even though SIP flows have seen a slight decline recently, disciplined long-term investing remains one of the most effective strategies to build wealth through market cycles. (Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of The Economic Times)