Devina Mehra, founder, chairperson and managing director of First Global, has shared her perspective on current market conditions and asset allocation strategies, particularly cautioning investors against heavy exposure to precious metals at current price levels.

Market Sentiment and Outlook

Mehra observes a notable shift in market commentary, with an increasing number of analysts openly discussing market risks rather than focusing solely on India's growth story. She interprets this broadly pessimistic sentiment as a potentially positive contrarian indicator, though she emphasizes that markets remain unpredictable in the short term.

Looking ahead, Mehra expects corporate earnings to begin improving from the December-ending quarter onwards. She notes that valuations are not out of line with historical trends when analyzed on an industry-by-industry basis, arguing that index-level valuations can be misleading due to significant changes in index compositions over time.

India's Global Performance and Currency Impact

India's equity market performance has been disappointing in 2025, ranking approximately 36th out of 42 major global markets. However, Mehra points to historical patterns showing that markets near the bottom of performance rankings sometimes bounce back in subsequent years.

Currency movement emerged as a significant factor behind India's underperformance. The rupee depreciated sharply, falling nearly 20% against the euro in 2025, while also touching around ₹90 to the dollar. This currency weakness significantly impacted returns for foreign investors, with Indian market returns in euro terms turning negative in 2025.

Precious Metals Investment Strategy

Mehra advocates for a cautious approach to precious metals investments, recommending only single-digit allocations in diversified portfolios. She challenges the common perception of gold as a safe haven asset, noting that historically, gold's dollar price has been more volatile than the S&P 500 over long periods.

Regarding silver specifically, Mehra points out that the metal has already tripled in rupee terms over the last two years, making it difficult to assess remaining upside potential. As both a precious and industrial metal, silver benefits from additional demand drivers beyond traditional safe-haven appeal.

Global Market Leadership and Concentration

Mehra highlights the narrowing of market leadership globally, particularly in the US where a handful of large technology stocks have driven most returns. In 2025, 43% of the S&P 500's returns came from seven major tech stocks, though this represents a decrease from over 60% in 2023 and 2024.

The concentration extends beyond US markets, with technology stocks fueled by artificial intelligence themes playing dominant roles across global indices, including in Asia. China and broader emerging markets have delivered strong returns recently, with China showing meaningful gains in dollar terms.

Key Concerns and Recommendations

Mehra identifies fiscal concerns as a key area of worry, noting that tax collections are running well short of budget estimates. This shortfall stems partly from weaker-than-anticipated nominal GDP growth, raising questions about the government's fiscal headroom for capital expenditure and support measures.

For investors navigating the current environment, Mehra recommends focusing on data rather than headlines, maintaining proper asset allocation, and practicing disciplined risk management. She emphasizes that uncertainty is a permanent feature of investing and advises against overreacting to short-term narratives while maintaining diversification across asset classes.

Indian equity markets have demonstrated resilience over the past year despite challenging conditions, with the Nifty delivering close to 10% returns on a total return basis. However, this performance masks significant divergence beneath the surface, as largecaps clearly outperformed while smallcaps declined around 7%, creating a substantial gap in relative returns.

Market Performance Divergence

The contrasting performance between market segments has reignited discussions about smallcap positioning and potential recovery prospects. The following table illustrates the performance gap:

Smallcaps Require Stock-Specific Analysis

Devina Mehra, Chairperson and Managing Director of First Global, strongly cautions against viewing smallcaps as a broad investment opportunity. "The smallcaps are always a company specific call. It is never a category call," she emphasized in an interview with ET Now.

Mehra highlighted that sharp drawdowns are intrinsic characteristics of the smallcap space rather than exceptions. She cited historical precedent: "The smallcap index in 2008-09 fell nearly 78%. To cross that high, it took eight years." This perspective challenges the assumption that recent declines automatically signal an impending rebound.

"It is not an aberration that the smallcap index has fallen for a year and should therefore bounce back," Mehra explained, emphasizing that investors should not expect automatic reversals after periods of underperformance.

Investment Philosophy and Market Outlook

Mehra reiterated her contrarian approach to market sentiment, stating that "sentiment is a contra indicator." This philosophy suggests that periods of anxiety and pessimism often present opportunities for staying invested, while comfortable market phases warrant greater caution.

From a portfolio management perspective, she emphasized maintaining consistency between current holdings and fresh investment decisions. This approach ensures alignment between existing positions and ongoing investment thesis.

Sector Positioning and Preferences

First Global's Portfolio Management Service (PMS) has maintained specific sector allocations based on fundamental analysis:

The FMCG sector positioning is supported by multiple factors including lower inflation, improving consumption trends, and margin relief from softer petrochemical prices.

Banking Sector Caution

Mehra expressed particular caution regarding the banking sector, describing herself as "a nervous investor in banks and lenders." Her concerns stem from the industry's inherent characteristics:

• Leveraged Nature: High leverage creates amplified risk exposure
• Unpredictable Risks: "Sitting outside you cannot make a call on where the next negative surprise will come from"
• Management Dependency: Success heavily relies on management decisions that may not always execute as expected

She referenced historical examples where successful banks like HDFC Bank and Kotak Mahindra Bank coexisted with other institutions licensed around the same period that encountered serious difficulties. "That is the nature of banking," she noted, where investors ultimately bet on management execution in a complex, leveraged environment.

Mehra's approach reflects a disciplined investment philosophy that prioritizes individual company analysis over broad sector themes, particularly in volatile segments like smallcaps and complex industries like banking.