What is the story about?
(Interview by Ayesha Faridi and Harsh) ET Now Exclusive: Ashwini Agarwal of Demeter Advisors on Tuesday shared his insights on asset allocation and stock
selection. In an exclusive interview with ET Now, he discussed the flat performance of Indian markets in 2025, the underperformance of mid- and small caps, and his cautious outlook for 2026. "Markets may continue to deliver flat or muted returns, making asset allocation and selective stock picking far more important than chasing index gains," Agarwal said. In this video, he shares his outlook on market conditions, portfolio strategy, and how investors should position themselves amid volatility and valuation concerns.
Key takeaways from Ashwini Agarwal's interview — HERE
Ashwini Agarwal reflected on the challenging economic landscape, drawing parallels with the 1994 market scenario. He said, "The next 3-4 years could be tough due to factors like NBFC crises, tight liquidity, and global events such as the Russian and Asian crises." Agarwal believes earnings growth is still elusive, despite hopes for improvement in FY27 driven by GST cuts and easing liquidity.
However, he highlights uncertainties, including a weak Indian Rupee (INR) if gold and silver prices rise, and potential risks from overseas, particularly if the AI bubble deflates. While AI is here to stay, Agarwal thinks some investments may not yield expected returns, impacting stock prices. Agarwal sees opportunities in stocks down 50-60 per cent from highs, offering bottom-up investment chances. He expects another year of flat returns, predicting a +/- 5 per cent movement in the broad market.
He said, "Asset allocation is the only way to protect capital—a mix of equity, debt, commodities like metals, and some real estate. One of the most underappreciated asset classes in Indian markets over the last 6-7 years is REITs. It's a good combination of growth and yield that tends to protect value."
"The metals rally is essentially a weak US dollar trade. That's how you protect value. The other way is bottom-up stock selection, though it's tricky if you're not a full-time professional. Asset allocation is the real key in my view," he added.
On earning growth he said, "I'm looking for earnings growth improvement—if momentum starts improving in December and March, showing a trend of stronger earnings, that would be welcome. The other is INR stabilisation, which requires precious metals like gold and silver to stabilise. INR weakness is a huge negative for foreign inflows—investors don't want to make money in stocks but lose it on FX."
"We need both INR stabilisation and earnings growth for me to change my view, and it can happen. Over the next 2-3 months, if we conclude the rupee will be stable for 1-2 years—perhaps from a US trade deal or other factors—that would be positive for inflows, along with emerging earnings growth for the broader market," he further added.
In the IPO segment, he said, "IPOs will continue—some are large and good quality, and investors are rightly interested. But they're being financed by selling existing holdings, so fresh foreign capital is quite limited. Even private equity—net out outflows to see fresh inflows. Commitments and interest are there, but valuations, lack of earnings growth, and a weak INR are dampeners. If these are correct, you'll see positive momentum."
"For the IPO party to end, we need a spectacular IPO to go terribly wrong—every bull market ends with a large IPO not making money for investors and dampening sentiment. I haven't seen that yet; some IPOs haven't done well, and the percentage in the green 3-4 weeks post-listing is declining, but sentiment hasn't broken. The IPO party continues for now," he said.
https://youtu.be/WkA2PQZ5YCg?si=Ad5twvtbTprPM8zu
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
