- Retail investors should avoid full equity allocation and maintain diversified exposure
- Indian equities are not at valuation extremes on a broad, sectorally adjusted basis
- Market sentiment extremes often mislead retail investors and are contra indicators
Retail investors should avoid being fully allocated to equities at any point in the cycle and instead maintain disciplined, diversified exposure, according to Devina Mehra, Founder & MD of First Global. However, she added that investors must stay invested in the market, not matter what the allocation.
Speaking on current market conditions to NDTV Mehra noted that Indian equities are not at valuation extremes across the board. While certain pockets may appear stretched, she emphasised that on a broader, sectorally adjusted basis, the market does not sit at either extreme of overvaluation or undervaluation.
She cautioned investors against shifting between extreme narratives that dominate market sentiment. In 2024, optimism around India's growth story and strong inflows led many to believe “there is easy money to be made,” with heightened interest in domestic equity themes. More recently, sentiment has shifted towards global diversification. However, Mehra said neither extreme approach is correct, and such swings in narrative often mislead retail investors.
“Sentiment is a contra indicator,” she said, adding that periods when markets feel overly easy or excessively optimistic are often not the best times for strong forward returns. Conversely, phases of caution and uncertainty tend to offer better long-term entry opportunities.
She also stressed that equity markets should not be viewed like fixed deposits, as returns are inherently unpredictable over short horizons of one to three years. Investors expecting linear or guaranteed outcomes are likely to be disappointed.
Mehra highlighted that retail investors should remain consistently invested, “Stay invested and do not go out of the market,” she advised, underscoring the importance of time in the market over timing the market.
She added that while sectoral divergences exist, the broader market is not currently positioned at valuation extremes that justify wholesale derisking or aggressive risk-taking.
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