Diwali investment picks 2026: 9 fund managers reveal promising opportunities and risks to watch

Your favourite investment theme this Diwali?

It’s asset allocation. Instead of hunt ing for the next multi-bagger, stay with the dharma of proper allocation across equity, debt, and commodities through mutual funds. They are the steady diyas that keep burning bright.

Which investment theme is a cracker— flashy, but unlikely to last?

Some small- and mid-cap stocks at cur rent valuations. They have already run hard. Unless they deliver extremely optimistic earnings growth, the return trajectory of the recent past is unlikely to continue. Low-fl oating stocks and pure momentum stories look especially fragile. The cracker looks bright for a few seconds, then only smoke remains.

If the market were a Diwali mithai box, which sectors would you pick?

Banking, fi nancial services and insurance (BFSI), and premium consumption. BFSI remains at the heart of India’s fi nan cialisation story. On the consumption side, focus on premium and discretion ary segments—automobiles, alcoholic beverages, travel, experiences and home improvement—where rising incomes and GST-related support could boost demand. Healthcare and select manufacturing sectors also offer opportunities. Avoid excessively valued stocks. Pick the mithais that suit your risk appetite and investment horizon.

If you could put only one asset class in your Diwali gift envelope?

It would be a diversifi ed portfolio. No single asset class is a guaranteed gift. Equity, fi xed income and a measured allocation to precious metals together make the envelope. The real gift is the habit of allocation, SIPs, and not reacting to every market event.

Gold has lit up investors’ portfolios. Would you still advise buying at cur rent levels?

If the market were a Diwali mithai box, which sectors would you pick? Gold has no yield and no intrinsic fun damental value in the usual sense; it de pends on someone else being willing to buy at a higher price. Keep it as a limited percentage of the portfolio (10-20%).

With the interest rate cycle turning, which debt funds offer the better Diwali opportunity—short-term or long-duration funds?

Prefer close-ended performing credit al ternative investment funds (AIFs) offering attractive carry, or income from interest payments. These funds can benefi t from gaps in corporate credit supply as banks, mutual funds and insurers pull back.

NILESH SHAH

MD, Kotak Mahindra AMC

Investment theme you would light up this Diwali?

Consumption would be my Diwali pick. Festive cheer may provide the initial spark, but improving demand keeps the momentum going.

A market theme that’s like a Diwali cracker?

The IPO craze resembles a Diwali firecracker: plenty of noise, excite ment and short-term sparkle. Like a fl ashy cracker, it can grab attention but fade quickly. Investors are bet ter off focusing on fundamentally strong companies than getting car ried away by listing-day excitement and market buzz.

Which sectors would you pick for your Diwali mithai box?

BFSI would be the motichoor laddu. I would also pick consumption, healthcare, jewellery and shipbuild ing while IT would be the dark chocolate: less popular today but offering selective value.

How to keep portfolios from getting burnt amid market risks?

The best protection is diversification, staying invested through volatility and keeping some cash aside, so you can seize opportunities when others are distracted by the noise.

If you could gift investors one as set class for the year ahead?

This Diwali, my gift envelope would contain equities. While markets can be volatile, they remain one of the best ways to outpace inflation and protect purchasing power over the long run. The key is patience.

How do you view gold?

Gold has already added plenty of festive sparkle, but I would still keep it in the Diwali portfolio. Some near term consolidation is possible, yet it remains a valuable diversifier.

Lakshmi Iyer

MD & CEO, Bajaj Alts

Which investment theme would you light up this Diwali?

This Diwali, I would light up India’s do mestic growth story. Rising aspirations, strong consumer demand, fi nancialisa tion and a healthy investment cycle will continue to create opportunities across sectors.

A market theme that will fi zzle out?

Themes driven by recent returns often resemble crackers, dazzling for a moment but quick to fade. Investors should be wary of chasing momentum alone. Lasting wealth is usually created through discipline, diversifi cation and patience.

Your Diwali picks?

Autos, private banks and domestic cy clicals would be my fi rst picks as they offer exposure to different drivers of India’s growth story.

How to keep portfolios safe?

Rather than reacting to every move, investors should stay diversifi ed, continue SIPs and stick to their asset allocation plan. Long-term fi nancial goals, not short-term noise, should guide investment decisions.

If you could gift investors one asset class for the year ahead?

This Diwali, my gift envelope would contain the wisdom of asset allocation rather than a single asset class. A bal anced mix of equity, debt and gold can help investors participate in opportuni ties, reduce emotional decision-making, manage risks and enjoy a smoother wealth-creation journey.

Is there still room for gains in gold?

Gold continues to play an important role as a hedge during periods of geo political and macroeconomic uncer tainty. However, investors should view it as a portfolio diversifi er and build exposure gradually as part of their asset allocation, rather than chasing recent gains.

Radhika Gupta

MD & CEO, Edelweiss MF

Your investment theme this Diwali?

My Diwali pick would be the twin themes of consumption and fi nan cialisation. Festive demand may provide the immediate glow, but rising incomes and growing partici pation in fi nancial products support a longer runway. I also like building materials and select auto ancillaries.

A Diwali cracker that’s likely to fizzle out?

Like a flashy Diwali firecracker, themes driven more by narrative than fundamentals fade quickly. Some new-age technology-platform businesses may offer promise, but investors should focus on sustain able economics, cash fl ows and competitive strengths rather than market hype.

If the market were a Diwali mithai box, which sectors would you pick?

A diversified mithai box rather than just the sweetest treat. Large banks, select IT, consumer discretionary, agri-inputs and healthcare stand out, offering a mix of value, recovery potential and long-term growth.

How can investors keep their portfolios from getting burnt?

Portfolios need risk controls. Diversify across sectors, avoid excessive leverage and favour businesses with resilient earnings and strong balance sheets.

Is there still room for gains in gold?

Gold’s sharp rise calls for caution. Maintain strategic allocation within a diversifi ed portfolio.

Vinit Sambre

Executive Director and Head of Equities, DSP Mutual Fund

Your investment theme this Diwali?

I would light up India’s manufacturing story this Diwali, focusing on automa tion, precision engineering and electrical infrastructure. I prefer companies with strong execution, customer relationships and capital discipline that can convert growth into sustainable returns.

Which theme will fi zzle out?

I would be wary of businesses valued mainly for their artificial intelligence or digital-infrastructure links.

If the market were a Diwali mithai box, which sectors would you pick?

Capital goods, electrical equipment, select financials and healthcare. Across sectors, I would favour companies with credible management, improving return ratios and strong cash generation. As with a good mithai box, quality matters as much as variety.

If you could gift investors one asset class for the year ahead?

Indian equities would be my Diwali pick for investors who can withstand volatil ity. Near-term financial goals, however, should not be exposed to equity risk.

Your view on the gold sparkle?

Gold’s real value lies in diversification, not endless price appreciation.

With interest rates turning, which debt funds offer the better bet: short- or long-duration?

No debt category automatically benefi ts from a rate-cycle turn. Short-duration funds carry lower interest-rate risk, while long-duration funds are more sensitive to yield movements. Perfor mance depends on infl ation, liquidity and whether outcomes differ from market expectations.

Bhalchandra Shinde

Fund Manager, Motilal Oswal Mutual Fund

Your favourite investment theme?

It’s the power generation and electrical equipment theme. The sector offers a long-term structural opportunity supported by rising energy demand and ongoing grid modernisation.

Market theme that will fi zzle out?

While Contract Development & Manufacturing Organisation (CDMO) and Electronics Manufacturing Services (EMS) offer attractive growth opportunities, investors should look beyond the festive excitement. The sectors can do well, but individual company outcomes may vary widely based on execution, technology capabilities and return profiles.

What’s in your Diwali mithai box?

My Diwali mithai box includes financials, electrical equipment and capital goods, consumer-facing businesses and pharma.

If you could gift investors one asset class?

Indian equities. The outlook may be uneven, but quality businesses can continue to create value over time.

Your view on gold?

Gold can help diversify risk and provide resilience during periods of uncertainty, making it a useful long term portfolio ingredient.

With interest rates turning, which debt funds offer the better bet: short- or long-duration?

At this point, I would lean towards short- to medium-duration funds. They offer reasonable accrual without taking too much interest rate risk. Long-duration funds can become more attractive once the direction of infl ation and interest rates is clearer.

Cheenu Gupta

Senior VP & Fund Manager Equities, HSBC Mutual Fund

Which market theme will fi zzle out?

Semiconductors, AI, private sector defence and electronics manufactur ing look fl ashy attracting plenty of attention and FOMO (fear of missing out). Investors should look beyond the sparkle, focus on valuations and be selective in stock picking.

Your Diwali mithai box?

My Diwali mithai box has two layers. The fi rst includes consumer platforms, private banks and pharma CDMOs, which continue to perform well. The second features NBFCs, real estate, aviation, hospitals and life insurance, where corrections have created at tractive opportunities.

Your Diwali gift?

My Diwali gift envelope contains equities. Market sentiment has remained subdued due to economic and geopolitical uncertainties, result ing in a time correction. Yet many companies continue to perform well, creating an attractive opportunity for investors willing to stay invested for the long term.

How do you view gold?

A modest allocation to gold can help diversify risk, hedge geopolitical uncertainty and improve portfolio resilience.

With interest rates turning, which debt funds offer the better bet: short- or long-duration?

With bond yields elevated, accrual oriented strategies such as low dura tion, short duration and corporate bond funds appear better placed for now. Investors can consider longer duration gilt funds tactically once macroeconomic and geopolitical uncertainties begin to ease.

Aditya Khemani

Head of Equities, Invesco Mutual Fund

Your favourite investment theme?

Indian equities. They have underperformed for two years and it is about time Indian markets did well for a number of reasons—most important being to get back to double-digit US dollar growth in earnings.

A flashy Diwali theme, which is unlikely to last?

The recent IT (information technology) rally in large caps.

Your picks for the Diwali mithai box?

New-age companies of all kinds.

A word to investors to keep their portfolio from getting burnt?

Invest in line with your risk handling ability.

One asset class that you would put in your Diwali gift envelope for the next year?

Indian equities.

Gold has lit up portfolios: do you still advise buying at current levels?

Yes. Gold is a hedge and investors can own up to 10% of their portfolio.

With interest rate cycle turning, which debt funds offer the better Diwali opportunity—short-term or long-duration funds?

Short-term funds for now.

Samir Arora

Founder & Fund Manager, Helios Capital

Which investment theme you favour?

Large-cap equities. With valuations below long-term averages and fi ve year returns close to fi xed deposits, they offer attractive risk-reward. Large caps also house many of the market’s highest-quality businesses.

A market theme that’s a Diwali cracker?

Some small- and mid-cap IPOs resemble a Diwali cracker: exciting at launch but often short-lived.

If the market were a Diwali mithai box, which sectors would you pick?

We would pick private banks, insurance, discretionary consumption and pharma, with select opportunities in capital goods. Financials benefit from India’s financialisation trend, consumption from rising incomes, and pharma adds resilience, creating a balanced mix of growth and stability.

How can investors keep their portfolios from getting burnt?

Markets constantly move from one popular theme to another, but a compelling story alone does not guarantee returns. Maintain asset allocation, focus on businesses with sustainable earnings, avoid FOMO and stay committed to long-term goals.

If you could gift investors one asset class for the year ahead?

My choice is Indian equities. After nearly two years of time and price correction, valuations are more reason able while earnings remain resilient. Near-term volatility may persist, but the risk-reward has improved for investors with a long-term horizon.

Harshad Borawake

Head of Research & Fund Manager, Mirae Asset Mutual Fund