Retail investors should avoid becoming fully allocated to equities at any stage of the market cycle and instead maintain disciplined and diversified exposure, according to First Global Founder and Managing Director Devina Mehra. However, she stressed that investors should continue participating in the market rather than attempting to exit entirely during periods of uncertainty.
Speaking to NDTV about current market conditions, Ms Mehra said Indian equities are not trading at extreme valuations on a broad basis, despite some pockets of the market appearing expensive.
She explained that while certain sectors may look stretched, the overall market — when adjusted across sectors — is neither deeply overvalued nor significantly undervalued at present.
‘Sentiment Is A Contra Indicator’
Ms Mehra cautioned investors against getting carried away by changing market narratives, saying retail investors often move from one extreme to another based on prevailing sentiment.
According to her, 2024 witnessed strong optimism around India’s growth story, fuelled by robust domestic inflows and enthusiasm around equity investing. This created a perception among many investors that making money in equities had become relatively easy.
However, she noted that sentiment has recently shifted toward global diversification and caution, with investors becoming increasingly nervous about market conditions.
She argued that neither extreme is healthy for long-term wealth creation.
“Sentiment is a contra indicator,” Ms Mehra said, adding that phases of excessive optimism are often not the best periods for strong future returns. On the other hand, periods marked by caution, fear, or uncertainty can sometimes provide better long-term investment opportunities.
Equity Markets Are Not Fixed Deposits
Ms Mehra also reminded investors that equities should not be treated like fixed deposits with predictable returns.
She said stock market returns are inherently uncertain over shorter timeframes of one to three years, and investors expecting smooth or guaranteed gains are likely to face disappointment.
According to her, volatility is a natural part of equity investing, and investors need to remain prepared for fluctuations rather than reacting emotionally to every market move.
‘Stay Invested, Don’t Exit The Market’
Despite advising against excessive exposure to equities, Ms Mehra strongly recommended that retail investors continue staying invested in the market over the long term.
“Stay invested and do not go out of the market,” she said, emphasising that long-term participation matters more than attempting to perfectly time market highs and lows.
She reiterated that while sectoral divergences and valuation differences continue to exist within the market, the broader Indian equity landscape does not currently justify either aggressive risk-taking or complete derisking.
Key Takeaways For Retail Investors
- Avoid going completely “all in” on equities
- Maintain diversified exposure across asset classes
- Do not make decisions based solely on market sentiment
- Avoid reacting emotionally to short-term volatility
- Stay invested consistently for long-term wealth creation
- Understand that equity returns are unpredictable in the short term