In a market environment where equities often steal the spotlight, fixed income continues to quietly play its crucial role in portfolio construction—especially for risk-averse investors and retirees.
In this edition of ETMarkets Smart Talk, we speak with Aamar Deo Singh, Sr. VP – Research at Angel One Ltd, who shares why fixed income still deserves a place in every investor’s portfolio.
Singh suggests a 15–20% allocation for the average investor to hedge against volatility and as much as 70% for senior citizens, underlining the importance of stability and capital preservation in uncertain times.
From sectoral outlooks to asset allocation strategies for FY26, Singh breaks down what smart investing looks like in the months ahead. Edited Excerpts –
Q) Thanks for taking the time out. Nifty closed with marginal gains in June, but for the first six months of 2025 – it is up over 7%. How do you see markets for the rest of FY26? Any big events to watch out for?
A) Overall, markets have witnessed a sharp pullback from the lows of April, to rally by almost 18% from the low, to trade as high as 25,669 in June, clearly indicating the inherent strength of the market.
Given the geo-political tensions between Iran & Isreal, spike in Crude Oil prices, Trump Tariffs threats, markets have displayed an unusual level of resilience, which bodes well for the rest of FY26.
Given that domestic macros are positive, with CPI well below RBI’s target rate of 4%, a declining trend in the interest rates, expected pick up in credit offtake in coming quarters, are expected to infuse bullish momentum in the markets.
Unless we see any major global meltdown, Nifty does hold the potential to hit record highs in the coming quarters.
Q) How are you managing the volatility in your portfolio? Any key learnings which you would like to share from 1H2025?
A) One needs to bear this in mind that there is getting away from volatility and one will need to learn to live with volatility, sometimes less, sometimes more.Further, going forward, fresh triggers, both negatives and positives, both domestic and global, will continue to drive the markets.
So, it becomes a prudent approach to have a mix of stocks in one’s portfolio, across multicaps, with a significant weightage to largecaps, in case one’s risk appetite remains on the lower side.
Further, one also needs to ensure that one does not stay concentrated in any one particular sector, no matter, how much promising it might appear to be.
Q) One of the reports suggested that India Inc.’s profits have grown nearly 3x faster than GDP since FY20. What structural factors are driving this divergence?
A) India’s GDP growth continues to remain amongst the fastest in the world, and it is expected that over the next couple of decades, it will continue to maintain its momentum with 6% plus annual growth rate.
The changing demographics, government’s impetus on scaling up the manufacturing base, assisting businesses in building infrastructure, focus on leveraging latest technologies, greater emphasis on growing exports at a faster pace, all these factors have aided the country’s growth and led to multifold growth in profitability of India Inc.
Q) With the China+1 theme gaining traction, which Indian sectors are best placed to attract global capital and scale?
A) Post Covid and post Trump’s tariff threats, India continues to remain in a sweet spot as the world, particularly the US & Europe, are looking at building alternate sources for their requirements, and with India’s technological capabilities, cost competitive manpower advantage, and the necessary infrastructure along with incentives, have helped India scale up its production and manufacturing capabilities, over the past few years.
And sectors such as defence, capital goods, consumer durables and infrastructure, are few sectors which are likely to attract global capital and scale in coming years.
Q) How is fixed income as an asset class looking for long term investment. How much money should one allocate as a hedge to combat volatility?
A) Fixed income as an asset class generates a significant amount of interest in investors, as this is an asset class, which generally helps in protection of capital, during volatile times.
Further, the investors who invest in this asset class, are more of the risk-averse type, looking at steady income flows rather than focussed too much on capital appreciation.
Overall, one should definitely look at investing 15%-20% of one’s capital in Fixed Income assets, and higher proportion, in excess of 70%, is recommended for senior citizens.
Q) Which sectors are likely to remain in the spotlight in 2H2025?
A) Sectors that are likely to remain in focus in 2H2025, include the likes of financials, defence, capital goods, pharma, energy, to make a few.
Auto ancillaries are also expected to do well, in the coming quarters, once we see an upick in credit offtake, post the 100 basis CRR cut by the RBI in its last MPC meeting, the effects of which are expected to be felt from September onwards, wherein expectation of over 2.5 trillion rupees are expected to additionally flow in the financial system.
Q) Can we say that we are in a “stock picker’s market” ahead. If yes, what are the key traits investors should look for in FY26 picks?
A) It is true that money isn’t going to come easy in the current market scenario, and it is a stock picker’s market because given the sharp run-up across the board, across sectors, valuations in many cases don’t come cheap.
And it is always prudent to remember the fact that the company might be a good investment from a long-term perspective, the million-dollar question is at what price.
Sometimes, it makes sense to do a stock SIP in companies from a long-term perspective. Else one can also look at ETFs as an option as well.
Q) Gold has also seen a tremendous run in 2025 – how do you see the yellow metal shining in 2H2025? Time to book profits or add on dips?
A) Gold has outperformed all asset classes this year, so far in 2025, with domestic gold prices up by almost 25% YTD, clearly indicating the love for the yellow metal, amongst the investor class.
Further, with the significant weakness seen in the US Dollar, and with the Trump Tariffs jitters initially, gold, also considered a safe haven asset, witnessed sharp untick in buying from central banks who are even more keen in diversifying their foreign exchange reserves, apart from ETFs which too witnessed significant inflows, with global holdings rising by 397 tonnes in first half of 2025, the largest increase in the past five years.
Gold should be part of everyone’s portfolio and holding it from a long-term perspective definitely merits attention.
Q) How should one play the small & midcap theme? Has the profitability improved compared to largecaps – what does the data suggest?
A) As far as the small & midcap are concerned, investors need to adopt a cautious approach because history has shown us that the fall is faster than the rise, and the fall is extremely steep, many times in excess of 50% erosion in value.
Large caps on the other hand, are more of the “slow & steady” category, so ideally having a mix of all, would be a more appropriate approach, depending on one’s risk appetite.
Q) Any sector which is running out of steam and investors should carefully pare their positions?
A) Defence stocks have witnessed a spectacular rally, and post the India-Pakistan conflict, this sector has once again taken off, with prices of some of the stocks hitting record highs and expensive valuations.
So, it would be wise to not invest all at one go in this sector, rather adopting an SIP mode over the long-term, would deliver better results.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)