Kolkata: The year 2024 has been marked by a strong bull run that lasted for the first 9 months between January and September. Then the bears struck back with FIIs (Foreign Institutional Investors) beginning to sell Indian stocks. In the following weeks, volatility set in. What has been the investment lessons in 2024 and how can they make us smarter in 2025? Anand K Rathi of MIRA Money has a few words of advice.
“The first key lesson we learned is that the market is highly volatile. We observed this around the time of the election results and even before, particularly with the announcement of exit polls. The market’s behaviour was erratic; it fluctuated significantly, experiencing an 8% drop before ultimately closing in positive territory. Therefore, if your risk profile is not aggressive, it’s crucial to avoid overexposing yourself to the market in anticipation of returns,” said Anand Rathi of MIRA Money.
Investing in themes can be challenging
“The second lesson is that investing in themes or sectors can be challenging. Many investors jumped into public sector undertakings (PSUs) immediately after the elections, assuming that government spending would lead to substantial profits similar to the gains made between 2020 and 2024. However, they soon realized this was a misguided decision as PSUs had already surged and ended up delivering negative returns. Investing in sectors that have already run up in value is generally not advisable. Proper research and an understanding of future potential are essential for successful investment, observed Rathi.
The third lesson pertains to overpaying for investments, he pointed out. India has been growing rapidly, prompting investors to pay high prices for multiple earnings. “However, when we began to see a decline in GDP growth numbers, the price-to-earnings (PE) ratios also fell, resulting in negative or no returns over the past six months. It’s important to invest wisely and avoid paying excessive prices that could lead to disappointing returns,” the expert remarked.
Monitoring economic indicators, valuation of small caps
Economic indicators such as GDP figures and stagnant auto sales that herald slowing growth should be monitored. Rathi points out that vigilant investors could avoid/reduce equity exposure. Rathi points out that despite perceptions of small cap stocks being overpriced, they continued to yield profits. “This is primarily because small-cap companies managed to deliver growth. Ultimately, earnings are the main driver for companies, and strong performance can lead to price appreciation, even when valuations appear reasonable,” he quipped. It is also important to monitor the role of FIIs, whose selling resulted in about 11% correction of the indices. DIIs flows are crucial too.
Diversification in portfolio crucial
Rathi thinks it is “essential” to ensure adequate diversification within the portfolio. Als, one should maintain balance across large-cap, mid-cap, and small-cap stocks. Locating value opportunities is another thing to do in 2025. Rathi observed that decreasing urban consumption has impacted the price of some FMCG stocks. If they dip further, they could be good additions to the portfolio.
What were the lessons from 2024 and how can they enrich our investment decisions in 2025? Anand K Rathi of MIRA Money says one’s portfolio needs to be diversified. He also advocated some degree of dollar protection in your investments. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
