ETMarkets Smart Talk: How to invest Rs 10 lakh in FY26 for long term growth? Inderbir Singh Jolly shares a smart strategy

“For an investor in the 30-40 age bracket with a high-risk appetite and ₹10 lakh to invest, the ideal asset allocation should strike a balance between growth, stability, and diversification,” says Inderbir Singh Jolly, CEO, PL Wealth Management.

In an interview with Kshitij Anand of ETMarkets, Jolly said: “Equities should form the core at 65%, with 30% allocated to large-cap funds for stability, 20% to mid-cap funds for growth, and 15% to small-cap funds for high-risk, high-reward opportunities,” Edited excerpts:

After a bearish February we entered a bullish March. How is market looking for the 1st month of the new financial year?

As the situation stands, we have already seen the worst kind of panic in the markets. It happened in the run up to March. Markets are always the leading indicator and they have stabilised for now.

I don't see that kind of pain setting in the near future. However, the upward ride will be slow and one has to be extremely choosy in selecting certain stocks.

Smallcaps and microcaps where valuations were 40-50x are not coming back in a hurry. It will be a stock-picker's market this year.

Trump’s tariff is something which has kept traders on the edge. What is your take on the recent announcements and how it will impact India Inc.?

India’s trade relationship with the US is entering a phase of recalibration, marked by temporary tariff volatility but deepening long-term strategic relationship.

Even if US tariffs on India rise to 15%-20%, India’s key export sectors—pharmaceuticals, electronics, jewelry, and textiles—operate within low tariff differentials, which means the impact of tariff escalation might not be huge in those sectors.

When it comes to autos, Trump's 25% tariff is not a big needle mover as the direct impact is quantitatively limited because in FY24 only $2.6 bn worth of automobiles and auto components were exported to the US which is 3.4% of total Indian exports to the US ($76 bn in FY24).

Of this, ~$2.1 bn is components, not vehicles—thus only a 12.5% potential reciprocal tariff arises, as India currently imposes 15% duties vs. the U.S.’s 2.5%.

In fact, India’s share in US auto component imports is only ~2.2%, compared to Mexico (39.1%), Canada (13.2%) and China (12%)—all of whom now face far higher effective tariff rates, so it is an opportunity for Indian auto exports.

A 5% diversion in U.S. sourcing from these players to India can unlock $1.5–2.0 bn in incremental exports over 18–30 months.

When it comes to Venezuelan oil, Trump has threatened 25% tariff on all imports from countries buying Venezuelan oil. India is directly exposed to this but most of it is sourced by Reliance, who have already indicated that they are pausing oil imports from Venezuela.
Since Venezuelan oil is only 1.5% of India's imports an alternative can easily be looked at via West Africa or discounted Russian blends—so the risk is containable.

The big picture is that while the tariff phase is disruptive, a broader India–U.S. trade deal by end-CY25 (target: $500 bn in bilateral trade by 2030) remains the structural anchor.

If managed strategically, India may exit this cycle with greater embeddedness in the U.S. & global supply chains.

FIIs flows seems to be showing signs of turnaround – how do you see the trend in FY26?
FII flows seem to have sold $13bn YTD—the highest in EM Asia. This is partly due to the INR weakening by about 5% in 2025 against the USD.

Consider a US investor: with US 10-year bond yields around 4.5% and the INR potentially depreciating further, their required return from Indian equities now exceeds 10% just to break even. Rs 6300 crore of buying in March is too soon to call a turnaround. Looking to FY26, a turnaround hinges on a few factors:

1) Improved Growth: If India's growth sustains in the 6.5–6.8% range or accelerates further, it could attract fresh FII interest.

2) Valuation Correction: If Indian stock valuations become more attractive compared to peers (European and Chinese markets are still more reasonably valued), it could entice buyers.

3) Stable INR: A more stable or strengthening INR would lower the return hurdle for foreign investors. FPIs have pumped in over $2.5bn into Indian G-Secs in Q4, aided by index inclusion flows (Bloomberg EM Index) and real positive yields. This has also helped INR emerge as Asia’s least volatile currency (1Y INR vol: ~3.9%, vs ~6.2% for KRW, ~5.8% for MYR).

4) Global Risk Appetite: Overall global investor sentiment towards emerging markets will also play a crucial role. A positive shift could bring FIIs back to India. With Trump tariffs yet to play out fully, we need to wait and watch FII's behaviour.

Any key developments or factors which one should watch out for in FY26?
Number one, Trump tariffs.

Number two, with lower inflation, tax cuts (Rs 1.25 lakh crore tax relief in Budget) should translate into urban demand recovery. Early signs from air traffic, cement, steel, and tractor sales in Jan–Feb 2025 already signal re-acceleration.

Number three, normal monsoons as per APEC climate center South Korea.

Number 4, how repo rate cuts by the RBI pan out and how easing liquidity by OMOs help the economy. We expect the RBI to cut repo by another 25bps to 6.00%. Liquidity remains tight (Rs 1.2–1.5 lakh cr deficit in March), but OMO operations and soft inflation (~3.6% CPI) set the stage for broader easing.

Expect credit transmission to accelerate in Q2. Systemic loan growth was 15.9% YoY in Jan’25 and could rise to ~16.5–17% in FY26 if rates drop further.

Lastly, the centre’s Rs 8 lakh crore H1 borrowing is 54% of FY26 total (Rs 14.82 lakh crore), largely front-loaded in 10Y–15Y belly. This signals continued infrastructure push. Green bond issuance (₹10,000 crore) in 30Y tenor and reduction in long-end maturity weightage reflects calibrated fiscal approach.

What should be the ideal asset allocation for someone who is in the age bracket of 30-40 years? If someone plans to deploy Rs 10 lakh?
For an investor in the 30-40 age bracket with a high-risk appetite and ₹10 lakh to invest, the ideal asset allocation should strike a balance between growth, stability, and diversification.

Equities should form the core at 65%, with 30% allocated to large-cap funds for stability, 20% to mid-cap funds for growth, and 15% to small-cap funds for high-risk, high-reward opportunities.

A 15% allocation to debt and fixed income, including 10% in corporate bond funds and 5% in liquid funds or fixed deposits, ensures stability and emergency liquidity. Real estate exposure through REITs, accounting for 10% of the portfolio, act as a natural hedge against inflation, preserving purchasing power and offering long-term capital appreciation potential.

Additionally, a 5% allocation to commodities via gold and silver ETFs provides a hedge against inflation and market uncertainties. This portfolio structure balances high-return potential with prudent risk management, making it well-suited for long-term wealth creation.

If someone is sitting on a net portfolio loss in 2025 – should they rejig the portfolio now? What are the key conditions which should get satisfied first before they rejig?
If an investor is sitting on a net portfolio loss in 2025, the decision to rejig should be based on key market conditions rather than an impulsive reaction. The first step is to assess whether the losses are due to a broad market correction or poor stock selection. If the investment horizon is long-term (5+ years), staying invested in fundamentally strong assets might be the better strategy. Investors should also review their asset allocation—overexposure to small-cap or high-beta stocks could be amplifying losses, and a shift toward a balanced mix, including large-cap stability, may be necessary. It’s equally important to analyse the fundamentals of underperforming stocks and funds, distinguishing between temporary setbacks and structural weaknesses. Liquidity needs also play a role—if there’s no immediate requirement for funds, exiting at a loss may not be wise. Additionally, there could be an opportunity for tax-loss harvesting, where booking losses helps offset capital gains.

Finally, investors should closely monitor macroeconomic triggers such as U.S. interest rate movements, India’s economic policies, and corporate earnings trends before making any portfolio adjustments. If certain assets are structurally weak or the portfolio is overly aggressive, shifting to better-performing sectors or diversifying further could be a prudent move. A data-driven, strategic approach is crucial—portfolio losses don’t always warrant a knee-jerk reaction.

What are the queries that you are getting from your clients?
In the current market environment, clients are primarily seeking clarity on market direction, asset allocation, risk management, and global diversification. Given the volatility in Indian equities and global macroeconomic uncertainties, we are seeing increased inquiries in the following areas:

Market Outlook & Investment Strategy – With the recent correction in small and midcaps, many investors are asking whether it’s the right time to enter or wait for further dips. Clients are also concerned about the impact of U.S. tariffs, global interest rate trends, and India’s monetary policy on their portfolios.

Portfolio Rebalancing – Investors sitting on 2025 portfolio losses are wondering if they should rejig their holdings or stay invested. Many are looking for sector rotation strategies, moving from overheated segments to fundamentally strong opportunities.

Fixed Income vs. Equities Allocation – Given expectations of rate cuts by the RBI in FY26, clients are asking about the right mix between equity and debt, especially with corporate bond yields offering attractive risk-adjusted returns.

Global Diversification – There is rising interest in Global Diversification, but many investors are unsure whether to invest via ETFs, direct stocks, or feeder funds and which jurisdiction i.e. US or developed economies or emerging markets or China. Additionally, they are seeking guidance on hedging currency risks.

Wealth Protection & Alternative Investments – With equity market volatility, clients are increasingly looking at gold and silver ETFs, REITs, and AIFs (Alternative Investment Funds) as a way to diversify and reduce downside risk.

Overall, the trend among investors is shifting towards a more balanced and globally diversified portfolio, with an emphasis on risk-adjusted returns, stable income options, and long-term wealth preservation strategies.

If someone plans to diversify globally – what would be the ideal portfolio allocation? Direct stocks or ETFs?
Global diversification is essential for building a resilient portfolio, but the choice between direct stocks, ETFs, and feeder funds depends on an investor’s risk appetite, investment horizon, and ability to track international markets.

A balanced approach combining these options can help optimize returns while managing risk effectively. For passive investors, ETFs are the preferred choice as they provide instant diversification, lower risk, and ease of management.

They allow exposure to global markets without the need for active stock selection. On the other hand, direct stocks suit active investors who have the time and expertise to research and track global companies.

This approach allows them to capitalize on specific opportunities in high-growth sectors and companies. For those who prefer a simpler route, feeder funds offer global exposure without the need for a foreign brokerage account.

These funds enable investors to participate in international markets through domestic mutual funds, making them an accessible option for global diversification.

How should one play the small & midcap theme in FY26?
Small and midcap stocks have delivered strong returns, with the BSE Smallcap index rising 28% and the BSE Midcap index up 25% in 2024, outperforming large caps.

However, early 2025 saw a sharp correction, with the Nifty Smallcap 100 down over 20% and the Nifty Midcap 100 falling 18.4% from their recent peaks.

In FY26, quality stock selection is key focusing on companies with strong earnings, low debt, and high return ratios. Sectors like manufacturing, capital goods, financials, and auto ancillaries could benefit from PLI schemes and infrastructure spending.

Given high volatility, investors should opt for a staggered investment approach (SIPs) and regularly review their portfolios.

While small and midcaps offer high growth potential, a disciplined, research-backed strategy with proper risk management will be crucial for success in FY26.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)