Amid market volatility, BofA bets on this sector for best risk-reward ratio

Investment banking and financial services firm, BofA Securities, is taking a careful yet hopeful view on investments. In a chat with CNBC-TV18, Amish Shah, who leads research for BofA in India, explained that the ups and downs in the market are due to uncertain global events. He prefers staying away from mid and small caps at the moment and believes the financials sector offers the best risk-reward ratio currently.

Despite the short-term volatility, he suggested that buying stocks when prices drop could be a good move for those looking to invest for a longer time. He pointed out that Indian companies have been doing well profit-wise, and their stock prices seem fair, making large-cap stocks an attractive choice right now. Moreover, valuations have reached reasonable levels, and a substantial portion of the Nifty market capitalisation, approximately 38%, is still trading below long-term averages.

Arbind Maheswari, who oversees Indian stocks at BofA, also noted that India is doing better than China in attracting investors. "India remains a favoured destination among emerging markets for foreign fund allocators, with a shift towards India-focused funds as evident from the current trends," he said.