Diversification Beyond Multiple Mutual Funds: Expert Offers Framework for Ideal Portfolio

Market Outlook: Navigating Volatility Amidst Global Uncertainty

The US-Iran conflict has significantly impacted earnings growth expectations for FY27, with estimates revised down to 8-9% from 13-14% pre-conflict, according to Nikunj Saraf, CEO at Choice Wealth. The sector-level impact is particularly evident in aviation, where Indian airlines are expected to post net losses of ₹170-180 billion for FY26 due to a surge in ATF prices over 85% in March 2026 alone.

Market Correction and Recovery

The conflict has led to a sharp correction in the Nifty 50 and Midcap indices, with declines of nearly 9% and 8% respectively since the escalation began. Year-end targets have been trimmed meaningfully, with the revised consensus clustering around 27,000, implying a target multiple closer to 19x forward earnings rather than the 20-21x the market commanded before the war. Despite this, Saraf finds the market ripe for buying the dip, but in a staggered manner, as the bottom might not be in place yet.

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Impact on FY27 Estimates

India's structural vulnerability to oil price shocks cannot be overstated, with the country importing nearly 85% of its crude. Even a few dollars' rise in Brent crude materially affects the country's energy economics. With Brent now around $96-97, some pressure has eased, but the scars on FY27 estimates are already visible. Pre-conflict, the market was pricing in 13-14% Nifty earnings growth for FY27, which has since been revised down to the 8-9% range.

Ideal Portfolio Structure

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Saraf recommends an ideal portfolio structure with three genuine pillars: Indian equities (60-70%), international equities (20%), and a 10% allocation to gold and silver as a structural hedge. Within Indian equities, the tilt should be away from crude-exposed names like aviation, OMCs, and paints, and toward financials, defence, capex plays, and metals. Small and mid-caps have corrected sharply and offer a good entry window for patient, staggered buying.

Sector Winners and Losers

The clearest structural winners in this environment are defence, financials, consumption, and metals. Defence is a multi-year policy story, with DAC approvals worth ₹79,000-1,05,000 crore already cleared. Metals benefit from sustained supply disruptions in the Middle East, lifting LME aluminium prices and directly benefiting primary Indian producers.

Global Markets and Rupee Depreciation

Investors should consider allocating 20-35% to international markets for genuine diversification. Rupee depreciation effectively adds a return kicker to dollar-denominated assets, making currency movement a source of additional return. Global markets offer meaningful exposure to large-scale semiconductor, AI infrastructure, aerospace, and biotech companies, sectors that don't exist at scale on Indian exchanges.