Indian stock markets are bleeding! BSE Sensex and Nifty50 have dropped as much as 13-14% from their all time highs in September last year. Foreign Institutional Investors (FIIs) sold equities worth Rs 81,903 crore in January and in February the trend has persisted with Rs 30,588 crore outflows till February 21, 2025. According to NSDL data, the total FII outflow stands at Rs 1.1 lakh crore!
Most market experts believe that while India’s long-term outlook is strong, the weak corporate earnings and valuation concerns are causing the profit booking. There is also the added threat of the impact of US President Donald Trump’s decision to impose reciprocal tariffs on India. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services says that revival of FII investment in India will happen when economic growth and corporate earnings revive. Indications of that are likely to happen in two to three months, he says.
In such a scenario, where should you put your money? What asset classes can you diversify your portfolio into apart from equities?
“Investors should think about diversifying into alternative assets in order to control risk and protect capital given the protracted drop in equities markets,” says Amar Ranu, Head – Investment Products & Insights at Anand Rathi Shares and Stock Brokers. “However, at the end, the client should stick to the asset allocation basis risk profile and keep on adjusting it depending upon the market movements,” he says.
Gold and Silver
Gold and silver have traditionally been a global investment hedge against uncertainties.
Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial services Ltd notes that a significant increase in uncertainty amidst geo-political tensions and US President Trump’s tariff threats is boosting the safe haven appeal for gold this year.
“Since Diwali 2024, we have seen a sharp depreciation in Rupee of ~3%, and this trend continued in 2025 as well; supporting the domestic prices. Supply demand dynamics this year has also played a significant role in overall gold price fluctuations. Recovery expectation in China, central bank gold buying spree, rise in overall investment demand has given a boost to total demand,” he told TOI.
Gold prices on a year-to-date basis have already increased by more than 10%. “We do believe bouts of correction are possible ; however, prices could continue to trade on the higher side from a medium to long term perspective. As per our reports we had given long term targets of Rs 86,000 on domestic front and $3000 on COMEX. We continue to maintain a buy on dips stance, with a $3000 target on COMEX, however fluctuation in USDINR will play an important role in overall move on the domestic front,” Manav Modi says.
Naveen Mathur, Director – Commodities & Currencies, Anand Rathi Shares and Stock Brokers says that the current uncertain scenarios make gold & silver a ‘perfect’ sought after destination with gold serving as a natural hedge against equities since September last year.
“Moving ahead, any corrective decline in gold prices on profit booking moves in such an uptrend could only provide buying opportunities for investors in short term scenario unless it gives a daily close below $2860 per oz in spot. Silver also could continue to outperform given its dual nature as an industrial asset and a hedge against uncertain economic backdrop.We expect Gold to test Rs. 87,900 – 88,500 per 10 gm levels in 1 – 2 months scenario a move closely aligned with $ 3040 – 3050 per oz levels in international markets. Silver on the other hand have the potential to test $ 33,70 – 34,50 per oz levels in Spot markets (CMP $ 32.75 per oz),” he tells TOI.
Mohit Gang, CEO, Moneyfront believes that for diversification, one of the ‘finest bets’ are gold and silver. “These two commodities have given terrific returns for the last 1 year and will always serve as a good hedge against extreme equity volatility.” Mohit Gang tells TOI.
According to an ET report, with gold on a record bull run, investors are also considering silver. Experts believe that investors can bet on silver ETFs to benefit from the precious metal’s rally.
In 2025, silver has risen 13.3% and gold has rallied 11.77%. However, silver has underperformed gold over the last three years.
“US Fed delaying rate cuts, peace talks between Russia and Ukraine, and slow implementation of the trade tariffs are headwinds for the yellow metal. The premises of uncertainty with which gold is presently rallying would vanish,” NS Ramaswamy, head commodity desk & CRM, Ventura Securities was quoted as saying by ET.
He is of the view that gold could reach Rs 95,000 per 10 gram levels in this calendar year, implying 9-10% returns in rupee terms. Silver is expected to rally more sharply due to a hike in industrial demand, he said.
Fixed income instruments: FDs, bonds and more
In times of volatile stock market trading, experts advocate looking at relatively conservative investment avenues that can provide stable and fixed returns, hence exposing a lesser percentage of your portfolio to riskier assets.
Nirav Karkera, Head of Research, Fisdom anticipates heightened volatility in the near to medium term. Given this outlook, allocating to fixed income can enhance overall portfolio stability and performance, he says.
“With the central bank initiating its first rate cut, the monetary easing cycle has begun. While subsequent rate cuts may not be immediate or aggressive, the medium-term outlook aligns with a lower interest rate regime. Current yield levels and the broader rate trajectory make a compelling case for investing in government securities and high-rated corporate bonds,” Karkera tells TOI.
Amid expectations of a bullish steepening yield curve, an intermediate to long-duration bond portfolio would be well-positioned to benefit. The most effective and efficient way to construct such a portfolio is through select debt mutual funds, particularly in the Gilt and dynamic bond fund categories, he says.
“To further optimize risk management, a moderate allocation—up to 25% of the portfolio—towards high-rated corporate bond funds and Banking & PSU debt funds can provide relatively stable accruals,” he adds.
Amar Ranu of Anand Rathi advocates fixed income instruments, such as corporate FDs or quality bonds that provide stability and predictable returns. “Over time, one might anticipate 7.5-8.5%, depending on tenure and grade,” he says.
REITs/InvITs:
Mohit Gang also says that REITs/InvITs look very attractive as long term debt funds. “These are likely to benefit with the falling interest rate scenario and could potentially yield better returns with a 1-2 year perspective,” he says.
Amar Ranu says majority of InvITs are AAA rated and include road, solar, or transmission assets. “The yield falls between 9 and 10% and it can be easily liquidated in case of requirement. For high ticket investors, investment options like Long-Short Funds or Performing Credit AIFs (offering a net return of 12-14%) can be additional bets which helps in enhancing returns in downside markets,” he says.
