How Can Your Portfolio Outperform the Market? Sandeep Neema Explains

Mumbai | February 25
Amid rising volatility and a shift from liquidity-driven gains to earnings-led performance, investors are asking a key question: how can portfolios still outperform? Neema, outlines what may drive returns in the next phase of the market.

The Easy Rally Phase Is Behind Us

Indian equities have delivered strong returns over the past few years, supported by liquidity, strong inflows and positive sentiment.

Now, markets are stabilising. Not every sector or stock is rising together.

According to Sandeep Neema, this is a healthy normalisation. It signals a shift from momentum-driven returns to earnings-driven performance.

In simple terms, just holding the index may not be enough to outperform anymore.

Stock Selection Matters More Now

Neema believes the next phase of returns will reward companies that show:

• Consistent earnings growth
• Strong balance sheets
• Clear business visibility

Sectors linked to India’s domestic growth story, such as financials, infrastructure, manufacturing and capital goods – continue to show resilience.

Export-linked and global cyclical sectors, however, may face pressure if global uncertainty persists.

The focus, he says, should be on quality businesses rather than chasing short-term themes.

Sector Rotation Can Create Opportunities

Market leadership is changing. As some sectors cool off, others begin to show improved earnings and better valuations. Selective sector rotation, based on fundamentals rather than sentiment, can help generate alpha.

Investors need to stay flexible and review portfolios periodically instead of staying concentrated in one theme for too long.

Should Investors Hold Higher Cash?

In volatile periods, increasing cash allocation may seem safe.

Neema says holding slightly elevated cash levels can help manage short-term risks. However, staying under-invested for too long can reduce long-term returns.

A disciplined allocation strategy is often more effective than trying to time every correction.

Will Regulatory Tightening Hurt Market Participation?

Recent regulatory steps around derivatives trading and capital market funding have raised questions about participation levels.

Neema views these measures as risk-management steps aimed at improving market stability. While speculative activity may moderate in the short term, stronger oversight can enhance investor confidence over time.

A stable market structure, he believes, ultimately supports long-term growth.

What Investment Strategies Are Seeing Interest?

Investor preferences are evolving in the current environment.

Multi-asset strategies are gaining traction as they provide diversification and help manage volatility.

Passive investing continues to grow for core exposure due to lower costs.

At the same time, active management remains relevant in India, where careful research and stock selection can still create meaningful alpha.

How Investors Are Positioning Differently

As markets become more selective, some investors are moving beyond traditional mutual fund allocations and seeking more customised portfolio strategies.

Neema notes that the growth in Portfolio Management Services reflects rising investor sophistication and demand for focused, high-conviction portfolios.

However, PMS is not a replacement for mutual funds. It serves as a complementary allocation for investors seeking differentiated exposure.

The Bottom Line

Outperforming the market in the current phase will require:

• Focus on earnings quality
• Disciplined stock selection
• Smart asset allocation
• Patience during volatility

The broad liquidity rally may have slowed, but opportunities remain for investors who stay selective and consistent.

With inputs from Business Standard.

For the full interview, click here.