As the market is expected to remain volatile for an extended period, investors looking forward to build portfolio should approach with caution by deploying bottom-up strategy, suggest experts.
Muhurat Trading on the Diwali day is considered an auspicious time to invest in equity market for healthy returns over a period of time.
Indian market, which witnessed a double-digit correction from record highs hit in August, gave many investors sleepless nights as portfolios of many turned red from black just in matter of months.
In last two months, benchmark indices were pushed below crucial support levels. But, it looks like we have hit a bottom at 10,000 on Nifty, and the only way for market to go is ‘up’.
The year 2018 has been volatile for both equity and debt market across the world primarily on account of a looming trade war between the US and China coupled with a change in interest rate policy across major central banks in developed countries.
Back home, domestic equity market fell about 10 percent from its peak while many stocks eroded wealth by more than 50 percent in some case. This scenario is ideal for investors to reshuffle their portfolio and what could be a better time to change the allocation than Diwali.
As the market is anticipated to remain volatile for an extended period, investors looking forward to build portfolio should approach with caution by deploying bottom-up strategy, suggest experts.
“At an aggregate level, we believe that large-caps offer a better risk-return profile; however, some individual stock names among small and mid-caps look better. Investors should stick to quality,” Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking.
“I think investors are well off doing staggered buying as more volatility is expected in the near term before elections. Our Sensex target for the 2019 year end is 45,000. Portfolio strategy: Equities – 40%, Debt – 30% - Mostly G Secs, Gold – 10%, and Cash – 20%,” he said.
If you have Rs 1,00,000 in hand and you are in the age bracket of 30-40 years, a reshuffle can be looked at after the recent fall in markets.
We spoke to various analysts to get their views on portfolio allocation till next Diwali. This portfolio is for reference purpose only and investors are advised to speak to their financial advisors for guidance:
Analyst: Lav Kumar of LIC Mutual Fund
An investor should always stick to his asset allocation plan and if he has more funds to invest, he should do so in the same pattern, so if equity has fallen, investors should invest more in equity to maintain asset allocation ratios.
For long-term investors, the following should be practiced. Cash investment should cover 6 months of contingency expense, equity should be 100 minus current age and debt and gold should be in the proportion of 80% and 20%.
An investor who is in age bracket of 40 years and earnings Rs 1 lakh per month can look at 60 percent allocation in equities after taking out necessary expenses.
For reference, monthly expenses are Rs 40,000; hence, he should invest Rs 35,000 in equities, Rs 20,000 in debt and only Rs 5,000 in gold. This is to be done after saving Rs 2.4 lakh in cash for 6-month contingency fund.
Analyst: Prasanna Pathak, Fund Manager at Taurus Mutual Fund
The portfolio should be adequately diversified into various asset-classes. Since the asset classes follow cycles, one must study, if possible, the market cycle that each asset class is in to decide the allocation.
Equity 50-60% (Diversified Equity Mutual Funds, Direct equity, Balanced funds) Fixed Income 20-30% (Diversified Fixed-Income MF, FD, Arbitrage Funds) Cash 10-20% (Cash in the savings bank, Liquid Mutual Funds)
Analyst: Raghvendra Nath, MD at Ladderup Wealth Management
When investors are entering equity markets, basically you are looking at long-term returns and the investment horizon has to be anywhere between 7 years and 10 years.
More so, there is an age-old saying — buy more when everyone is fearful and sell when everyone is greedy. Following that, considering that the markets are down substantially in the last one year, these are very good opportunities to invest and also see returns in the short term and not only long-term.
If somebody is 35-40 years of age, and he has to plan for long-term, he should have 60-70% of his portfolio invested into equities, around 10-15% into fixed income and balance can be in gold and real-estate.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.