The market is premised on hopes that there will be full normalcy by FY22, says Srivatsa.
Market valuations are looking stretched and the rally that we have seen is hope based rally, hence, it would make sense for investors to allocate a major amount of portfolio towards debt, V Srivatsa, EVP & Fund Manager – Equity of UTI AMC said in a podcast D-Street Talk with Moneycontrol.
“The markets are fairly valued, and equity allocation could be staggered in the next 6-12 months either via Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) allocation,” he said.
Srivatsa further added that it makes sense for investors to have higher allocation towards Debt primarily because the risk-to-reward is in favour of Debt, he added.
From the equity markets perspective, plenty of factors both global and domestic let to a rebound in the market. The Nifty and the S&P BSE Sensex have rallied by over 50 percent each from the March lows.
“Investors are pinning hopes of FY22 to deliver strong growth and seem to be ignoring FY21 valuations. In terms of valuations on FY22 basis, markets are trading slightly above the mean value, and from Price-to-book, it is still trading around the average – which means that market is not too expensive but investors should tread with caution,” he said.
In terms of risk, the second wave of COVID infections, followed by global liquidity are major global risks that the market faces. On the domestic front, there is a lot of hope that the economy will normalize in the next couple of quarters – if that doesn’t happen or it gets postponed will be a major risk for Indian markets.
The market is premised on hopes that there will be full normalcy by FY22 basis and any risk to that will derail the market at this juncture, says Srivatsa.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.