India’s Growth Is Strong. Your Portfolio May Need a Closer Look

Every equity investor knows the feeling. You open your demat app, the portfolio is flat or red, and a colleague who bought into the Korean or Taiwanese market, either through ETFs or other sources, seems to be having a better year. Indian equities have turned choppy and have lagged several emerging markets, so the question is whether to stay the course, rotate into whatever is working, or step aside. It deserves a better answer than blind optimism or panic.[EasyDNNnews:PaidContentStart]

The backdrop is unsettling. Global growth is slowing to roughly 2.8–3.0 per cent, and Middle East tensions have kept crude oil near USD 105 a barrel, with a severe escalation risking a spike beyond USD 150. India imports most of its oil, so this matters twice because it pressures the rupee and inflation and squeezes corporate margins. Foreign institutional investors (FIIs) are on a selling spree in Indian equities, yet domestic institutions absorbed it and more, investing a record `8.09 lakh crore. According to the IMF’s latest July 2026 World Economic Outlook Update, India’s growth outlook remains among the strongest globally, with GDP growth projected at 7.0 per cent in 2026 and 6.4 per cent in 2027. This compares with the IMF’s global growth forecast of 3.0 per cent for 2026 and 3.4 per cent for 2027. But strong economic growth and modest stock returns can coexist, particularly when valuations already assume good news and foreign money is finding better opportunities elsewhere.

The first lesson is that domestic money is a cushion, not a guarantee. Mutual Funds now hold about 23 per cent of NSE free-float market capitalisation, up from roughly 15 per cent in March 2021. Foreign selling no longer automatically means a crash. But flows support prices. They do not create earnings. For a stock picker, the risk is that money crowds into the same large, liquid names, stretching their valuations while the average stock languishes. Over time, your returns will come from what your companies earn, not from who is buying them.

The second lesson is that oil does not hit every business equally. Companies with heavy fuel or feedstock costs and limited pricing power, such as airlines, paints, tyres, chemicals and oil marketing, feel the squeeze first. Businesses with strong domestic demand, low debt and the ability to pass on costs are sturdier. A useful exercise is to ask of each holding what happens to margins if crude stays near USD 120. If you cannot answer, you do not yet know your risk.

Third, be careful with the emerging-market comparison. Markets take turns leading, and chasing whichever did best last year is a classic way of buying near the top. Investing abroad also brings currency risk, higher costs and regulatory limits. A year or two of relative underperformance is not proof of a broken thesis, though a sustained shortfall in corporate earnings would be.

Fourth, hedges have a price, and so does impatience. Gold and silver ETFs drew higher FY26 net inflows than equity ETFs, reflecting geopolitical nerves. They can steady a portfolio when oil spikes, but they generate no earnings and can fall sharply too.

So, what should you do? Begin by reviewing each holding for balance-sheet strength, pricing power and oil sensitivity, and trim only where the business case has weakened, not merely the share price. Consider managing gains within the `1.25 lakh annual exemption and use losses in weak holdings to offset Taxable gains. Unabsorbed losses can be carried forward for eight years. Keep gold and silver to a modest share, say 10–15 per cent, and avoid leverage and speculative derivatives trading, where SEBI’s own studies have repeatedly shown that most individual traders lose money.

We also recognise that the past two years have been a difficult and often frustrating period for many equity investors. Volatility, uneven stock performance and frequent shifts in market leadership have made it harder to judge whether a portfolio is fundamentally on track or needs attention.

Over the years, DSIJ has built a trusted relationship with investors by standing alongside them through their investment journey. Continuing this commitment, DSIJ is offering a Free Portfolio Health Checkup as a goodwill initiative. You can share details of your equity portfolio with us at pas@dsij.in. Our team will review the portfolio and highlight key areas that may deserve your attention.

RAJESH V PADODE
Managing Director

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]