How to boost portfolio returns when Nifty 50 delivers zero growth

The Nifty 50 has delivered zero returns in the past year. But a deep dive reveals major variations across asset classes and even within equity segments. Here is a round-up of the recent 1-year returns across Indian indices, asset classes, and global funds, alongside key insights for asset allocation and portfolio strategy.

Returns of key equity indices

While the Nifty 50 delivered zero returns from September 2024 to September 2025, the broader index, Nifty 500, was down by 4.09%. Nifty Midcap 150 delivered -2.88% and Nifty Smallcap 250 delivered -6.86%.

Midcap and smallcap indices underperformed large caps in the last year, reversing the prior multi-year trend. Passive funds tracking these indices have delivered returns in line with this. However, the returns of top-performing actively managed funds in various categories were better.

The top 3 large-cap funds have delivered 1.5 to 7% in the last 1 year. Top 10 flexicap funds delivered 2-6%, top 5 midcap funds delivered 2-7% and the top 4 smallcap funds delivered 1-4%. Rather than trusting just the indices, resorting to actively managed funds would have resulted in slightly better returns. Some of these active funds have taken a higher risk to outperform the indices.

Look beyond domestic equities to increase returns

While the returns of Indian equities were disappointing, a look beyond the territory and diversifying 10-20% of the equity portfolio could have resulted in better returns for your equity bucket. The returns of some of the global funds, which are available here in the ETF or FOF route, have delivered very high returns, and even a small exposure to them would have impacted your equity portfolio returns meaningfully.

Mirae Asset Hang Seng Tech Fund, which invests in tech stocks in the Hang Seng Index of Hong Kong, delivered over 100% in the last 1 year. Even a 10% allocation of your equity portfolio to this fund would have enhanced your equity bucket’s return by 10%. Invesco India-Invesco Global Consumer Trends FoF, which invests in consumption stocks, largely US-based, has delivered 64% and Edelweiss Greater China Offshore FOF delivered 54%.

A meaningful exposure to these funds would have ensured that your equity portfolio delivered 5-10% positive returns vs 0% of the Nifty 50. Exposure to global themes and sectors also reduces country-specific risks and can deliver superior returns during specific market cycles.

The glitter of returns from the precious metals

The precious metals ruled the investment space in the last 1 year. Gold delivered around 45% and silver also delivered similar returns. Global uncertainties like geopolitical tensions and trade tariff concerns turned the wind in favour of these metals.

Tactically raising gold exposure to 10% (from 5%) is sensible when gold leads amidst crises, despite a lower 10-year rolling return compared to equities.

Silver’s scope as an investment avenue has sharply increased as it's critical for new age technology/industries like EVs, 5G, and semiconductors. The US government has tagged it a critical metal, and global central bank buying in silver has started. Consider a 5% allocation to silver for growth and portfolio diversification. It's time that silver is considered a default part of your asset allocation.

Both these metals are at their historical highs and are still surging. Going forward, silver could take a big lead against gold in returns, given its growing utility and demand.

Returns of other major asset classes

The 1-year interest of FDs of large banks was 6.5 to 7%. Corporate Bond Funds delivered around 8%. Top Multi Asset Funds delivered 10-15% thanks to gold, silver, and international equities.

REITs and InvITs

REITs and InvITs are moving out from the darkness of popularity due to the light from their much better-than-usual returns. Added to this, they became more tax efficient from July’2024. These instruments are now treated on par with equities. Long-term capital gains (holding period above 12 months) are taxed at 12.5%, while short-term capital gains are taxed at 20%. Importantly, long-term gains also enjoy the ₹1.25 lakh annual tax-free exemption.

If you were to look at the returns of the last 1 year, they delivered what equities are expected to deliver. REITs delivered over 15% on the whole, including a dividend yield of 6-7%. InvITs’ returns were in the range of 8-14%.

The recent SEBI move to classify REITs as equity is expected to be a game-changer for the category. With real estate, India’s most widely held asset as the underlying, REITs are well-positioned to scale up significantly. Equity funds are likely to allocate meaningfully to REITs, given the added stability they can provide relative to stocks.

A large portion of REIT returns comes via dividends derived from rental income, which tends to be highly predictable. This makes REITs a natural risk mitigator for equity portfolios while also acting as a source of consistent returns.

While equity returns of the last 1 year were low, if one followed the principle of asset allocation meticulously, spreading the investments across all the above asset classes, the returns would have been far better than a 100% domestic equity portfolio. Some of these asset classes have delivered on par or even better than the conservative expectation of 12% returns from equities. An asset class that usually delivers sober returns can surprise you in the phases when the tide turns towards it, giving a pleasant surprise.

Key portfolio lessons and suggestions

• Actively managed funds, global allocation, and multi-asset funds substantially outperformed the Nifty 50 in the last year.

• Multi-asset allocation remains the key, spreading across domestic equity, global equity, fixed income, gold, silver, REITs, and InvITs, smoothens returns and derisks portfolios.

• Avoid chasing last year’s winners as cycles keep rotating; a recent year of flat/negative return in equity is normal and typically followed by rebounds.

• The median 5-year-plus CAGR for diversified equity funds remains in the low to mid-teens, historically well above most other asset classes. This can be achieved despite navigating through a year or 2 of negative returns during the journey. The discipline of SIPs should continue undeterred without looking at the return chart.

• Asset allocation, a core exposure to diversified equity, meaningful global, fixed income, gold, silver, and REITs, increases resilience and offers best-in-class risk-adjusted returns.

• Stay diversified, rebalance regularly, and avoid over-concentration on recent outperformers as asset allocation is the winning strategy for long-term investing.

V.Krishna Dassan, Director, Dhanavruksha Financial Services Pvt. Ltd.