Mahesh Patil, Co-CIO, Aditya Birla Sun Life MF feels that the current valuations provide an excellent opportunity to increase equity weightage through well-managed mutual funds. In fact, he advises investors to rebalance their equity-debt allocation in such a manner that the equity portion in their portfolio should be slightly higher than where it stood before the correction.
However, Patil warns that investors should not opt for aggressive lump sum investments at this point. He says that it is wise to top up SIP in equity funds at this point. If investors want to go for lump sum investments, they should spread out their investment over 2 months.
Patil prefers the large cap space and advises investors to allocate a large chunk of their equity investments towards large or multicap funds. His preference for large companies is primarily because of two reasons. One, many sector leaders have now corrected significantly and thus the space offers attractive valuation. Two, large franchises have better ability to weather challenging times such as the current one.
In an interaction through ABSL MF's Facebook page, Patil shared his views on the current market dynamics. Here are the key highlights:
- Since there was a lot of easy money in the Indian equity market, the Covid-19 outbreak triggered panic selling and led to a steep correction
- Now that the market has corrected by around 30%, panic selling has abated and the 7,600 mark should be a very strong support level for Nifty 50
- Nevertheless, the lockdown will have a severe impact on earnings of most sectors in the Apr-Jun quarter
- As a result, equity markets could move with a mild downward bias in the near-term
- For savvy investors who want to invest in thematic funds, the pharma and healthcare sector looks fairly attractive. Select stocks in the consumption space are also likely to do well
- Banking and finance sectors may face problems in the near-term but after 3 months some of the strong and big banks are likely to do well
- From a longer term perspective, investors can expect handsome returns if they invest in MFs at this point
- Central banks and governments have responded to the pandemic actively. Announcement of fiscal stimulus by several countries will be effective in supporting the global economy
