A year of strong equity returns; build a well-diversified portfolio

Gold delivered double-digit returns in 2023; experts expect debt to catch up in the year ahead

- Jash Kriplani

Returns from investment are the best indicator of the performance of various asset classes. And that helps investors determine which asset class is a winner and which ones to avoid. While the winners among asset classes keep rotating every year, the absence of any such pattern over the last 10 years (see chart), reinforces the importance of asset allocation in building a balanced portfolio. Here’s a quick look at the performance of different asset classes in 2023.

Indian equities: going strong

After a lacklustre performance in 2022, domestic equities were back with a bang in 2023. The S&P BSE SmallCap Index is up 45% year-to-date (as of 27 December). The S&P BSE MidCap Index was up 42%. International equities also did well, with the S&P 500 Index delivering 25% returns in rupee terms. The S&P BSE Sensex, which is seen a barometer for Indian market, was up 18%.

Experts remain positive on Indian equity markets. "I am positive on the large-cap side. In terms of historical returns, we are not even at the trendline. In terms of valuations, we are not at the highest end. But I would say, investors need to be very cautious on the small-caps. A lot of new investors are entering the market and might get carried away by the returns being seen in the small-cap stocks," says Dubai-based Devina Mehra, founder of First Global group.