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: overseas fund. The derivatives story might not be over yet and the US revival throws up a lot of conundrums. "I am advising my clients to remain extremely cautious at the moment," he says.

And, a healthy dose of liquidity is quite what the doctor ordered for uncertain times, which have a strong optimistic background. "The India growth story is very attractive and if the government unleashes productivity enhancing measures, then it could very well be one of the largest economies in the world by 2050," sys Jim O'Neill, head of global economic research with Goldman Sachs.

Inflation and interest rates, remain the key indicators that investors should look out for. Sufficient evidence of improvement on this front should prompt investors to take a serious look at rebalancing portfolios for the longer term. Allocating 20-30% of funds in liquid or near liquid assets could be the norm.

At the moment, liquid funds, arbitrage funds, and fixed maturity plans offer strong opportunities for returns and liquidity as well. "As inflation expectations are set to get better, fixed maturity plans with indexation benefits offer a strong investment opportunity," says K Ramnathan, head fixed income, ING Vysya Asset Management.

Fixed deposits are strict no-no say financial planners. After calculating tax and considering inflation at 7% levels, they actually offer negative returns, is the reasoning.

Diversification

Uncertain times also call for creating a defence for the portfolio. Clearly, the heady days of extreme vertical growth and uninterrupted runs in the market are behind us. There is growth, but it will be tempered with rational corrections. In such times, the need to have an exposure to defensive stocks becomes paramount. And this is reflected in the fact that since January, the BSE FMCG sector index has actually gained 4.18% when the entire market tumbled. And even when the markets have turned around, the FMCG sector grows at 5% levels, versus the 18% recorded by the Sensex.

During the heady days, allocating 80-90% of the portfolio to high growth sectors was opportunistic. Now, that the overdrive mode is off, it is time to get pragmatic and have around 15-20% exposure to defensive stocks in the FMCG, pharmaceutical, and other consumer sectors. "Growth or no growth, people would require toothpastes and medicine," said Parag Parikh, chairman of PPFAS and author, in an earlier interview.