Shiv Gupta Recommends Diversified Portfolio with Equities, Debt and Alternatives; Corporate Earnings, IPO Activity and Foreign Flows to Shape Market Direction

After several years of strong outperformance by small-cap and mid-cap stocks, India's investment landscape appears to be entering a new phase where large-cap companies are once again attracting investor interest. According to Shiv Gupta, Founder and Chief Executive Officer of Sanctum Wealth, blue-chip stocks are becoming increasingly attractive as valuations moderate and earnings visibility improves.

Speaking on the outlook for Indian financial markets, Gupta highlighted that while the Reserve Bank of India's monetary easing cycle has largely run its course, the next phase of market performance will be driven by corporate earnings, global macroeconomic developments, foreign institutional investment and the pace of primary market activity.

He believes investors should remain disciplined in their asset allocation and avoid chasing momentum, especially in segments where valuations have become stretched.

Corporate Earnings to Determine the Market's Next Move

According to Gupta, the upcoming earnings season will be the single most important catalyst for Indian equities over the coming quarters.

Following cumulative interest rate cuts and a pause in monetary policy, liquidity conditions have become more stable. However, with benchmark indices trading at relatively elevated valuations, earnings growth must now justify current stock prices.

Market participants are broadly expecting mid-teen earnings growth during FY27, and Gupta believes companies will need to meet or exceed those expectations for the market rally to sustain.

Strong quarterly results, healthy management guidance and stable profit margins are likely to be rewarded, while any earnings disappointments could trigger sharp corrections in richly valued sectors.

Three Key Factors Investors Should Monitor

Beyond quarterly earnings, Gupta identified three major themes that are expected to influence Indian markets over the next year.

1. Global Energy Prices

Crude oil remains one of the most important macroeconomic variables for India. Stable or lower energy prices could support inflation, corporate profitability and consumer spending, while a sharp rise in crude prices may put pressure on inflation and fiscal balances.

2. Foreign Institutional Investment (FII) Flows

Foreign portfolio investment continues to play a critical role in determining market liquidity and valuations.

Sustained FII inflows could provide additional support to Indian equities, while any reversal due to global uncertainty or higher US yields may increase market volatility.

3. India-US Trade Developments

Progress on a potential India-US trade agreement could strengthen exports, attract foreign investment and improve long-term economic growth prospects.

Alongside these factors, investors should also closely monitor future policy decisions by the Reserve Bank of India as inflation and economic growth evolve.

IPO Pipeline Could Influence Market Liquidity

One area Gupta believes deserves greater investor attention is India's rapidly expanding IPO market.

A strong pipeline of public offerings reflects healthy corporate confidence and supports long-term capital formation.

However, a large number of IPOs can also temporarily absorb liquidity from secondary markets as institutional and retail investors allocate fresh capital toward new listings.

For investors, this means balancing participation in promising IPOs while ensuring existing portfolios remain adequately diversified.

The quality of businesses entering the market, rather than simply the number of IPOs, will be an important consideration.

Large-Caps Becoming Increasingly Attractive

After a prolonged period during which mid-cap and small-cap companies dominated returns, Gupta believes the valuation gap is beginning to favour large-cap stocks.

Although broader market companies have delivered superior performance over the past year, many continue to trade above their long-term valuation averages.

In contrast, large-cap stocks now offer:

• More reasonable valuations

• Better earnings visibility

• Strong corporate governance

• Higher liquidity

• Greater resilience during periods of market volatility

The Nifty 50, which had traded at premium valuations over the past year, has witnessed moderation in valuation multiples, improving its relative attractiveness compared with smaller companies.

Gupta believes market leadership naturally rotates over time, and the current environment could support renewed interest in India's largest listed companies.

Diversification Remains the Best Investment Strategy

Rather than attempting to predict short-term market movements, Gupta recommends maintaining a well-diversified investment portfolio.

His preferred allocation over the next 12 to 18 months includes:

Alternative investments include:

• Private Equity

• Private Credit

• Structured Credit

• Gold

• Other non-traditional investment opportunities

According to Gupta, diversification has become increasingly important as global uncertainty remains elevated and market cycles become shorter.

Gold and Silver Becoming Core Portfolio Holdings

One notable trend highlighted by Gupta is the growing acceptance of precious metals as permanent portfolio allocations.

Gold, traditionally viewed as a safe-haven asset during periods of uncertainty, is increasingly being treated as a strategic long-term investment.

He also observed rising investor interest in silver, driven by both its industrial applications and its role as an alternative store of value.

The increasing allocation toward precious metals reflects investor efforts to diversify portfolios beyond traditional equity and debt investments.

Private Markets Continue to Attract Capital

Apart from listed equities, investor demand for private market investments remains robust.

Private equity continues to attract long-term capital as investors seek exposure to high-growth businesses before public listing.

Meanwhile, private credit and structured credit products are witnessing increased participation due to their potential to generate attractive risk-adjusted returns.

International investing has also broadened significantly, with Indian investors increasingly looking to diversify geographically and participate in global growth opportunities.

Artificial Intelligence Offers Long-Term Investment Opportunities

Discussing artificial intelligence, Gupta described AI as one of the most significant technological shifts currently reshaping global industries.

However, he cautioned against viewing AI solely as either an opportunity or a threat.

Historically, transformative technologies have rewarded companies capable of adapting quickly rather than simply replacing existing industries.

The current phase of AI investment has focused heavily on infrastructure.

The next stage is expected to involve widespread adoption across sectors such as:

• Financial Services

• Healthcare

• Manufacturing

• Retail

• Logistics

• Consumer Technology

India could emerge as a major beneficiary as businesses increasingly integrate AI into daily operations to improve productivity and customer experience.

Wealth Management Industry Entering a New Phase

Gupta expects India's wealth management industry to continue expanding over the coming decade, supported by:

• Rising household wealth

• Increasing financialisation of savings

• Growing investor awareness

• Wider investment product availability

• Stronger demand for professional financial advice

However, competition within the industry continues to intensify.

Technology investments, talent acquisition and rising client expectations are increasing operational costs, while pricing pressure has compressed margins across several product categories.

Despite these near-term challenges, Gupta believes the industry's structural growth opportunity remains extremely attractive.

Consolidation Expected Across Wealth Management Industry

As technology becomes increasingly central to wealth management, Gupta believes industry consolidation is inevitable.

Larger firms with stronger technology capabilities, wider distribution networks and greater operational scale are expected to gain market share over time.

Several developments could accelerate consolidation, including:

• Prolonged periods of weak equity markets

• Rising technology investment requirements

• Margin compression

• Higher regulatory expectations

• Firm-specific operational challenges

Artificial intelligence is also expected to reshape advisory services by enabling more personalised investment recommendations, improving productivity and enhancing client engagement.