Investors should avoid chasing daily market movements and use periods of volatility to rebalance portfolios, preserve tactical liquidity and identify businesses with the potential to emerge stronger from uncertainty, according to Lakshmi Iyer, Group President Investments and Managing Director and Chief Executive Officer of Bajaj Alts, and Anu Jain, President at 360 ONE Wealth.

Iyer emphasised that investors should remain committed to their original asset allocation strategies during market corrections. Sharp declines can alter portfolio weightings, but investors should restore their desired allocations in a measured manner rather than sell in panic or chase a sudden market rebound. She advocated consistency and discipline over the pursuit of short-term returns, comparing successful investing to steadily accumulating runs rather than attempting to hit boundaries with every delivery.

Explaining her approach to long-term portfolio construction, Iyer outlined a framework she calls Brahma Vishnu Mahesh, which assigns distinct roles to equities, real assets and disruptive investment opportunities. Equities form the Brahma component and serve as the primary engine of long-term wealth creation. Gold and real estate represent Vishnu, providing diversification and stability, while Mahesh represents selective exposure to disruptive themes such as artificial intelligence and opportunities in unlisted investments.

Iyer also highlighted the importance of maintaining cash as a tactical allocation rather than allowing it to become a large, permanent portfolio holding. Liquidity can provide investors with the flexibility to capitalise on market dislocations and attractive valuations. However, excessive cash holdings can limit long-term wealth creation if investors remain on the sidelines for too long.

Jain similarly emphasised the importance of preserving liquidity to take advantage of opportunities across asset classes over the coming years. According to her, attractive investment opportunities frequently emerge after an asset class has undergone a substantial correction. Investors therefore need patience and sufficient financial flexibility to deploy capital when valuations become compelling instead of investing simply because prices have declined.

Jain also expressed support for selective investments in unlisted alternative investment funds, provided they are backed by rigorous research and due diligence. She noted that periods of significant uncertainty and structural change can create opportunities for new market leaders to emerge. However, identifying these businesses requires detailed analysis rather than indiscriminate exposure to popular investment themes.

On market valuations, Jain referred to the price-to-book ratio as a historical indicator for assessing long-term investment opportunities. She noted that market valuations below approximately 2.75 to 2.8 times on this measure have historically been associated with favourable subsequent returns. However, this valuation range should be treated as a reference point rather than a definitive indicator that a market bottom has been reached.

Investors must continue to evaluate individual companies based on their growth prospects, financial strength and valuations. This approach is particularly relevant for mid-cap and small-cap stocks, where valuations remain relatively less comfortable than those of large-cap stocks despite the market correction. Both experts' views underline the importance of disciplined asset allocation, adequate liquidity, rigorous research and selective investing during periods of market uncertainty.