Rising inflation, volatile markets, and global geopolitical tensions are making it harder for investors to achieve stable real returns, according to market experts. In a recent discussion with Zee Business on investment strategy, financial experts highlighted that while portfolio growth may appear slower, the bigger challenge is maintaining inflation-adjusted returns in the current environment.

Experts Pankaj Mathpal, Managing Director of Optima Money, and Pratibha Girish, Founder of Finwise, explained that the slowdown in returns is not unusual, but rather part of a broader economic cycle influenced by inflation, currency weakness, and global uncertainty.

Mathpal noted that higher inflation directly reduces the real value of investment returns.

“Real return means inflation-adjusted return. If you are earning 7 per cent and inflation is 6 per cent, your actual return is only 1 per cent. After taxes, it becomes even more difficult to beat inflation,” he said.

He added that rising crude oil prices, a weakening rupee, and geopolitical tensions are collectively pressuring markets and corporate profit margins, which in turn impact overall portfolio growth.

Both experts emphasised that investors often misinterpret short-term slowdowns as structural weakness. According to Girish, markets naturally move through cycles of expansion, slowdown, and recovery.

“When growth is strong, spending increases and prices rise. When inflation rises sharply, growth slows down and discretionary spending falls. This cycle keeps repeating,” she explained.

She added that recent years of liquidity-driven market rallies created unrealistic expectations, where nearly every investment appeared to generate strong returns. That phase, she noted, has now shifted.

Mathpal said investors are currently finding it more difficult to generate strong inflation-beating returns, but stressed that this is temporary.

“Equity markets will remain under pressure as long as inflation stays elevated. But India’s long-term economic story remains intact,” he said.

He advised investors to align portfolios with economic and business cycles rather than chasing short-term performance.

A key theme from both experts was the importance of portfolio diversification and periodic rebalancing.

Girish pointed out that investors often chase assets that have recently performed well, leading to overexposure in certain segments such as gold, silver, or specific equity themes.

“Behavioural bias makes investors chase returns. But the right approach today is stability, not chasing momentum,” she said.

Mathpal agreed, adding that portfolios often drift away from their original allocation due to market movements. For example, commodities like gold and silver saw sharp rallies recently, leading many investors to become overexposed without realising it.

He stressed that rebalancing is essential to restore the intended mix of equity, debt, commodities, and other assets.

Experts suggested a more defensive and structured approach to investing in the current environment:

• Focus on asset allocation rather than stock picking or sector rotation
• Maintain diversification across equity, debt, commodities, and real estate
• Avoid excessive exposure to recent outperformers like gold or small segments of the market
• Prefer diversified mutual funds, especially actively managed ones that adjust to market conditions
• Review portfolios regularly to ensure risk levels remain aligned with financial goals
• Girish added that investors should avoid trying to ‘chase returns’ and instead focus on stability and long-term compounding.

“In uncertain markets, the goal is not maximum returns but consistent returns across cycles,” she said.

Mathpal highlighted that commodities such as gold and silver continue to play an important hedging role during inflationary periods. However, he cautioned against over-allocation.

He also noted that real estate investment trusts (REITs) can be useful because they typically have low correlation with equities and help hedge against inflation.

Girish further recommended limited international exposure—around 10 per cent to 15 per cent, depending on investor goals—to diversify away from domestic market risk.

“Global diversification helps smooth returns because different markets perform differently at different times,” she said.

Despite current concerns, both experts maintained a positive long-term outlook on India’s economy. They emphasised that temporary slowdowns should not discourage long-term investors.

“The economic cycle will turn again. Investors who stay disciplined and diversified are the ones who benefit most over time,” Mathpal said.

While inflation is currently making it harder to achieve strong real returns, experts say the solution is not aggressive risk-taking but disciplined investing. A balanced portfolio, proper asset allocation, and regular rebalancing remain the most effective strategies for navigating uncertain markets.

As Girish summed it up, “Markets will keep moving in cycles. Your strategy should not depend on chasing the cycle—but on surviving and growing through it.”