In an interview with ETMarkets, Belapurkar said: “Don’t sell in panic, equity markets are a great long term asset class, but will be volatile in the short term,” Edited excerpts:
How should MF investors play the political uncertainty? Which theme is likely to do well?
Most investors are best served by investing into diversified equity funds, where fund managers will express their conviction on sector/themes stocks, with graded underweight/overweight calls.
Trying to time entry and exit into specific themes/sectors is difficult for investors, as they are susceptible to significant volatility and investors should avoid taking outsized exposure to any sector/thematic fund, unless they have a fundamental basis to express a very specific view.
After seeing a 6% fall on election day what are the things which retail investors should avoid doing?
A) A few things to keep in mind:1) Don’t sell in panic, equity markets are a great long term asset class, but will be volatile in the short term. The best course of action is to stay invested.2) Don’t immediately reallocate all capital to equity, markets may continue to be volatile. Keep the asset allocation discipline and gradually allocate towards equity.3) Don’t buy into narrow sector/thematic funds, these tend to be much more volatile than broader markets.
Indian enjoyed premium valuations amid strong fundamentals. Do you see derating in the market amid political uncertainty?
In the last few years, Indian equities have experienced a significant rally, driven by strong GDP growth, robust corporate earnings, ample market liquidity, and increasing participation from domestic retail investors.
This upward trajectory has led global funds, especially those focused on emerging markets, to increase their allocation to Indian equities.
This thesis is expected to continue, although rich valuations have resulted in EM managers booking some profits from Indian exposure.
What will work best after the recent fall for retail investors — lump sum investment, SIP, or STP (weekly)?
Retail investors should continue to invest via SIPs. It is the best means to avoid market timing risk as well as instill financial discipline of saving and investing regularly.
If someone plans to put Rs 10,00,000 in mutual funds — what proportion should be index funds, balance funds, flexi cap, etc.
The allocation will depend on the risk return objectives and investment time horizon of the investor. There is no one size fits all solution.
If an investor has a reasonable risk appetite and a long investment time horizon, they can allocate greater assets towards more growth asset classes like equities as long as they can ride out interim volatility.
(For illustration only) If an aggressive investor who has a 15-20 year investment horizon. They can invest as follows:
Equity: 90-95%, Fixed Income 5-10% (For emergency, liquidity needs).
Within Equity: Large Cap : 50-55%, Mid Cap: 25%, Small Cap : 15%
Note: The above is only for illustration purposes
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