S Naren’s investment Strategy: Why it’s time to ‘gradually increase’ equity allocation

The first day of FY27 started on a relatively cheerful note after the 10% plus correction in March. In fact, the Nifty and the Sensex have now fallen 14% in the first three months of 2026. In terms of valuation too, it has come off significantly from the highs of 23-24x. The benchmark indices are trading at levels seen last April. Celebrated market veteran S Naren believes the “time is now appropriate to gradually increase allocation to equities.”

Speaking on the state of markets, S Naren, ED & CIO, ICICI Prudential AMC pointed out that, “Based on our valuation and sentiment indicators turning more favourable, we believe this is an appropriate time for investors to gradually increase their allocation to equities while continuing to focus on asset allocation strategies.”

Returns unlikely to be as high as Covid times

It has been a tough month for asset classes across the board. Be it equities, gold, silver or crude, there have been some wild price swings since the conflict began across West Asia.

Quite understandably, similarities have been drawn to Covid times when the Sensex and Nifty fell over 30% at the height of the panic and saw an equally smart recovery thereafter.

Naren was quick to point out that the returns are unlikely to be as high as Covid times. However, unlike 2020, return expectations should be more moderate given the global uncertainties,” he added.

According to him, the key difference was that in 2020 the markets were not only cheap, domestic investor positioning was negative. But in comparison, the current valuation continues to be relatively high. Though the macro situation seems to be under control, the sharp surge in crude prices is seen as a key worry. The rupee’s depreciation is also a key worry for the markets.

What’s the right investment strategy now

Speaking on the right investment approach in the given circumstances and the uncertainty that the war across Middle-East has brought forth, Naren pointed out that, “In such an environment, investors may consider starting SIPs or STPs in diversified and unconstrained equity categories such as flexi-cap, value or business cycle funds, while continuing to use asset allocation funds to navigate volatility.”

Highlighting the importance of a disciplined investment strategy, he concluded by saying, “As always, disciplined investing and avoiding extreme positions remain the key.”