Investment strategy: Equities still the best bet, continue SIPs and build a diversified portfolio, say experts

Investors should focus on their goals, risk profile, and investment duration to decide how and where they want to invest.

The Indian equity benchmark indices, BSE Sensex and NSE Nifty, crashed more than 6 percent each on June 4 after election results surprised investors. However, financial experts believe that events such as election results should not play a lot of role while investing in the stock market for long-term goals.

The Bharatiya Janata Party-led National Democratic Alliance (NDA) was leading in 292 seats as of 1 pm, while the INDIA bloc was ahead in 230 seats. The results are much closer than what most exit poll results had predicted earlier in the weekend.
With final election results still pouring in, mutual fund investors are looking for cues for their next move.

Stay the course

As per experts, while election results can make the market euphoric or nervous for a few days, the key factors for long term growth are the policies that the government comes up with and implements.

They are also believe that the continuation of the government will always be looked at as a positive sign for the overall economy.

“However, the portfolio needs to be based on your financial goals and objectives and not events like election results,” said Harshad Chetanwala, co-founder, MyWealthGrowth.com.

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According to Ankit Jain, Senior Fund Manager at Mirae Asset Investment Managers, election results, though of vital importance to the nation, should not be the only criterion to plan investments.

“Overall portfolio construction approach should remain unchanged - to build a diversified portfolio, with a balanced risk-reward equation. The earnings outlook for domestic cyclicals and capital goods remain good, though it has to be seen in the context of current ask rate factored in the valuations,” said Jain.

Jain further suggests that investors should focus on their goals, risk profile, and investment duration to decide how and where they want to invest.

“That said, if investing for long term, a large part of your portfolio should be geared towards equities or equity-oriented mutual funds. Investors should also put a portion of their portfolio in debt funds and gold ETFs (exchange-traded funds) so that your capital can be preserved in case of volatility,” he said.

Stick with SIPs

To be sure, for starting systematic investment plans (SIPs) one need not look at election results as the investment will always get averaged over a period. SIPs also takes care of timing the market.

“When considering investments in sectors driving the Indian economy, it's essential to focus on key industries poised for growth. Sectors such as agriculture, textiles, automobiles, information technology (IT), and financial services are integral to India's economic landscape. These sectors offer significant potential for investment, driven by factors such as domestic demand, global competitiveness, and technological advancements,” said Vinnaayak Mehta, Founder, The Infinity Group.

According to Chetanwala, predominantly it is the stock market that stays in in the limelight during election times, as elections typically do not have much impact on other asset classes.

“Before the results, we have been advising investors to invest 40-50 percent as lump-sum and invest the rest in three to four months after the results. Now, one can look at investing 60-70 percent of their money in one go in case of lump-sum investment as we now have better clarity on the election results,” said Chetanwala.

Where to invest?

According to experts, investments should be made in reasonable valuation pockets.

“Mid-cap and small-cap valuations are very expensive, maintain caution in these segments. Opportunity lies in large-caps, which are reasonably priced versus mid-caps and small-caps.

Opportunity lies in growth strategy funds, which have underperformed over three years versus value strategy. Also, opportunity lies in dynamic asset allocation/balanced advantage funds (hybrid). Also, good time to book profits if your goal is nearing in six months to one year,” said Rushabh Desai, founder, Rupee With Rushabh Investment Services.

Also read | Stay calm, don’t get swayed by election results, say financial planners

Atul Parakh, CEO of Bigul suggests investors should consider a mix of defensive and cyclical sectors to mitigate risk while capitalising on potential opportunities.

“Defensive sectors such as healthcare, utilities, and consumer staples can provide stability during uncertain times, while cyclical sectors such as industrials, financials, and technology may benefit from economic recovery and policy changes. Additionally, maintaining exposure to quality large-cap stocks with strong fundamentals can offer stability amid market fluctuations,” said Parakh.

Meanwhile, Mehta is of the opinion that focusing on businesses demonstrating consistent earnings growth that are available at reasonable valuations can mitigate risks and capitalize on potential opportunities in the evolving market landscape.

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