Given where the markets are, experts advise diversify into few less correlated asset classes in order to smoothly sail through any market condition. From stocks, real estate mutual funds to gold, fund managers’ investment ideas varied as they see plenty of opportunities and advised how should one approach to play it right with the current market conditions.

Big themes to track

While it is true that stock markets are at new highs and valuations are not compelling, but key drivers of stock prices are corporate earnings growth and liquidity. Both favour markets as corporate India is likely to report healthy earnings growth in the coming quarters, said Srinivas Ravuri, CIO Equity, PGIM India Mutual Fund.

This along with the financialization of savings and lower interest rates, can continue to drive up stock markets. Asset allocation is the most important part of financial planning. Our preferences are MFs, global, REITs, real estate, stocks, and gold in that order.

Trying to capture short-term market opportunities is very appealing but extremely difficult to execute. For example, buying good quality companies March 2020 crash should have been the easiest thing to do, but very few could actually do it, and even more frustrating is people actually selling their holding in April-June 2020 quarter hoping to buy them cheap later. So, best is to buy good quality MFs, REITs and stay invested.

Manufacturing and Consumption are two big themes to track. The government’s encouragement through PLIs and the need for additional sources to reduce dependence on China has created a favourable environment for the Indian manufacturing sector (Electronics, Chemicals, Pharma to name a few). Rising share of middle-class consumers would result in faster growth of consumer discretionary products, and technology would play a more prominent role, Ravuri added.

Asset allocation

Ashutosh Bhargava, Fund Manager and Head Equity Research of Nippon India MF said that given where the markets are, it’s better to diversify into few less correlated asset classes like equities, bonds and gold. That said, investors with at least 3 years or higher investment horizon must have very high proportion of equities in her portfolio as this has the best odds to give decent inflation adjusted returns.

From a shorter-term time frame, Bhargava advised asset allocation strategies like balance advantage funds or multi asset funds.

“If India must achieve its true potential, then credit to GDP must grow from less than 60% now to 100% over the next decade. Therefore, all kinds of financial intermediaries should be the key part of long-term investors portfolio,” he added.

Equities for the long-term

Chandraprakash Padiyar, senior fund manager, Tata Mutual Fund believes that on a long-term horizon (10 year+), Indian equities will continue to play a major role in any asset allocation and hence would continue to recommend equities. Also, as discipline investors should maintain their overall asset allocation depending on their personal risk profile and financial goals. Short term volatility is bound to take place in all asset classes which should not impact the overall asset allocation.

Padiyar further said that he is a firm believer of investing through diversified mutual fund schemes. Thematic and sectoral funds are generally used to add risk/reward in one’s asset allocation, however one needs to time the entry and exit well in such cases.

“Markets are a slave to earnings and a value of a business over time grows on the back of growth in its earnings and cash flows. Keeping this in mind, I think at the current juncture, growth will be delivered by most sectors/companies and hence it is likely to see a broadbased market movement. However, I think India manufacturing as a theme can stand out in the next 5-10 years and is something I would watch out for going ahead,” he suggested.

ETFs or MFs, commodities or REITs

Asheesh Chanda, Founder & CEO, Kristal.AI said that when it comes to choosing between ETFs & MFs. ETFs offer certain benefits over MFs. For instance, they are cheaper than MFs and are easy to buy & sell. They do not have entry & exit loads like MFs too. However, if one is looking for unique strategy with an aim to generate market beating returns, then MFs may be better way to find the right fund manager to meet one’s expectation.

Coming to the current market situation when the prices are ‘high’ in both domestic & global markets. We think it’s time to stay invested in great business and increase exposure to income generating instruments.

For short term, Chanda is moderately bullish on ex-US developed markets, emerging markets (ex-China) as they are likely beneficiaries of a pick-up in global growth, coupled with easy policy. 

Meanwhile, he has a very bullish on REITs given robust global growth with inflation likely higher than the past, lower probability of a spike in yields and greater demand for higher dividend-yielding investments presents a benign environment.

Also, “very bullish on commodities on the back of demand pick up due to global growth, coupled with supply shortages have likely triggered a commodity supercycle. Structural tailwinds due to electrification / clean energy and cyclical demand for inflation protection, bolster our positive view,” Chanda added.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!