Markets slide across equities, gold and silver: Why asset allocation rules are back in focus

With markets correcting across equities, gold, and silver, investors are once again grappling with a familiar question: what should they do next?

Consider this: Benchmark indices Sensex and Nifty extended losses for a second straight session on March 30, weighed down by a sharp surge in oil prices above $114 per barrel amid escalating tensions in the Middle East, which dampened investor sentiment. The Sensex was down near 1,000 points, or 1.35 percent, at 72,586.42, while the Nifty fell near 300 points, or 1.29 percent, to 22,524.90 in the opening session.

Similarly, Gold has also corrected by over 10 percent in one month while silver has fallen by over 16 percent. On Monday, MCX gold opened 0.42 percent down to Rs 1,46,255, silver edged 0.33 percent to Rs 2,27,343.

While the instinct is often to time the market or chase the next outperformer, experts say the answer lies elsewhere: asset allocation.

The ongoing volatility has been a reminder that no single asset class consistently delivers. Equities have seen sharp drawdowns, gold and silver have corrected after a strong rally, and sectors that led previous cycles are no longer clear winners. In such an environment, maintaining a balanced portfolio becomes critical.

“The allocation that I like the most is 70 percent equity, 20 percent fixed income, and 10 percent precious metals or other hard assets,” says Vaibhav Porwal, Co-founder at Dezerv.

Equities continue to form the core of long-term wealth creation, especially after recent corrections that have made valuations more reasonable in select pockets. However, the key is not just equity exposure, but diversification within it. “Within the 70 percent equity allocation, about 20 percent should be in global equities,” he adds, underlining the importance of reducing concentration risk.

India’s market capitalisation declined 8 percent during the fiscal year to $4.5 trillion from $4.83 trillion a year earlier, marking its steepest fall since FY23. Globally, only 13 markets saw a drop in market cap during this period, with India ranking among the nine worst performers.

"People should use diversification as their preferred investment method, which requires them to allocate 50 to 60 percent of their portfolio to equity for growth, 20 to 30 percent to debt for stability, and 10 to 20 percent to gold for portfolio protection," said Piyush Jhunjhunwala, Founder and CEO, Stockify.

Fixed income, often overlooked during bull markets, plays a crucial role during uncertain times. It provides stability and, more importantly, liquidity. “Fixed income gives you a buffer. It gives you the ability to stay invested and also provides liquidity during an environment like this, where you can add to your equity. The third component, precious metals, is often misunderstood. Many investors enter gold and silver after a strong rally, expecting further returns. But their primary role in a portfolio is not to generate high returns, but to act as a hedge.

“Don’t look at precious metals purely from a return point of view. Invest in them for stability. These are the asset classes that help in tough environments,” says Porwal. One of the biggest mistakes investors make in volatile markets is chasing recent winners. Assets that have performed well attract disproportionate allocations, only to correct sharply later. The recent fall in gold and silver prices after a strong rally is a case in point. Equally important is reviewing portfolios as market cycles change.

“Whenever the cycle changes, the winners of the new cycle are very different from the winners of the previous cycle,” Porwal notes, adding that investors should periodically reassess their holdings.

Ultimately, volatile markets are less about predicting the next move and more about staying invested through uncertainty. A disciplined asset allocation approach not only helps manage risk but also ensures investors are positioned to benefit when markets recover.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.