Nikhil Walavalkar
Moneycontrol News
As the benchmark indices have been going strong on bourses, it is imperative for the investors to be euphoric. However, the seasoned names on the street are going slow on stocks. A look at some of the long term performers make it clear that, it is that time of the year, when you tread with care in stocks.
A look at the portfolio of ICICI Prudential Balanced Advantage Fund, the largest mutual fund scheme In India investing in stocks reveals that the exposure to stocks have been cut over last one year. The net equity investments of this scheme are down to 54% as on February 28, 2017 as compared to 77% on January 31, 2016. The fund manager invests rest of the money in bonds and money market instruments. “Scheme’s allocation to stocks is based on price to book multiple and some other macro-economic factors. As valuations rise we cut our exposure and the other way round,” says Manish Gunwani, deputy CIO-equity, ICICI Prudential Mutual Fund.
Another top quartile performer over last decade, Quantum Long Term Equity Fund has also cut its exposure to stocks from 95% to 85% over last one year ended February 28. “We take a stock specific approach. We sell stocks that reach their sell limits. If we do not see stocks attractively valued for investment, the cash builds into the portfolio,” explains Nilesh Shetty, associate fund manager, Quantum Mutual Fund. While these two schemes have been going away from stocks gradually as valuations go up, DSPBR Micro Cap Fund has stopped accepting fresh investments since February 20.
Over last one year ended March 17, CNX Nifty has rewarded investors with 21% returns. This surge is caused by the expansion in valuation multiples. The price earning multiple for CNX Nifty has gone up from 20.28 to 23.78 over last one year. The price to book multiple for the same index has moved up to 3.47 from 3.01 earlier. An increase in valuation multiple connotes increased valuation and dear stocks.
Experts opine that the retail investors should not get carried away with the ongoing rally in the market. “Stick to your asset allocation and keep rebalancing your portfolios as per your schedule. If you are a first time investor, go for equities if your financial goals allow you to hold on to your investments for long term,” says Kiran Telang, SEBI registered investment planner and co-founder of Mumbai based Dhanayush Capital Advisors. Even if you are looking to invest in equity mutual funds, take the systematic investment plan route.
“If you are keen to invest lump-sum money in market, invest only 75% of the money now. Rest you can invest on declines if any,” advises Nilesh Shetty. Experts believe that the markets are expected to remain volatile in the near term. The midcap stocks that remained on investors’ shopping list for the last couple of years should take a back seat as they are more susceptible to volatility. “Equity mutual fund schemes with large cap portfolios or multi-cap portfolios make investment sense,” says Manish Gunwani.
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