After correcting by nearly 40% from their all-time highs, Nifty 50 and Sensex have now recovered sharply. Now, Nifty 50 and Sensex are only around 6-7% down from their all-time highs in January.
Now the dilemma for many advisors is what to recommend to those clients who want to invest their surplus fund in equities to take advantage of the current rally. We asked some of the top advisors what they have been recommending to their clients who want to invest lumpsum money in equity funds.
Kochi MFD Shiney Sebastian of Affluenz Financial Services feels that at this point, lumpsum in equity funds is not a great idea. She recommends investing in safer fixed income products such as liquid funds and using systematic transfer plans to invest in equity funds like multi cap funds. By doing this, investors can avoid the shock of a sharp correction if it happens in the very near term.
Remember the clients will regret the most if they invest at this point and lose money rather than not investing at all, she adds.
Further, if the investment horizon of investors is around 3 years, she suggests dynamic debt funds.
Kolkata MFD Bharat Bagla of Beas Network feels that such investors should wait for the next correction to make a lump sum investment in equities. He is of the view that at this point, markets are overvalued with Nifty 50 crossing 11,600. Moreover, there are uncertainties such as the new margin norms that would kick in from September 1 and could bring down the volumes. Overall, these uncertainties are more likely to rock the boat rather than pushing it.
Bharat recommends clients to invest in less volatile and safer avenues such as liquid funds and wait for the next market correction to make lump sum investments. For the short term, he recommends short and medium duration funds
Mumbai RIA Suresh Sadagopan of Ladder7 Financial Advisories feels that advisors should first check the investment horizon of their clients. If these are long term goals like retirement planning and children education and are 10 years away, the P/E ratio of the current market will not make a huge difference. Nevertheless, they should opt for STP to avoid catching market highs.
Suresh feels that investors with high-risk appetite can invest in mid cap and small cap funds. Investors with moderate risk appetite can invest in hybrid fund, index fund and large cap fund. And moderately aggressive investors can look at multicap funds.
He advises to avoid timing the market. Suresh admits that his Instinctive feeling is also that there will be a correction but it is not always right. In March, he felt the market could correct till 20,000 but that did not happen.
Mumbai MFD Vinod Jain of Jain investments said that he would recommend equity funds only if the investors have the time horizon of around 10 years. He recommends diversified equity fund to his clients at this juncture.
