The equity market indices are touching all-time highs every now and then these days, while the economy is showing signs of recovery but far from being out of the woods. This poses the typical market dilemma for investors: Whether to wait it out expecting for a correction or get aggressive as there could be a lot of steam left in this bull rally.
Here is what these fund managers told us.
Sonam Udasi, Fund Manager at Tata MF feels that markets are getting slightly ahead of the fundamentals. “The reason for this rally is that the risk free rates across the globe (investment in safer government bonds) are coming down. So, market participants, especially overseas investors are willing to invest more in risky assets like equity. Therefore, it is better to be cautious at this point and avoid lump sum investment,” he said.
However, there are experts who have a different point of view. S Krishnakumar, CIO - Equity, Sundaram MF feels that the policy of central banks and governments across the globe are pro-growth at this point. This is injecting liquidity and supporting the Indian markets. Further, the expectation of vaccines coming out anytime now has also lifted the mood of market participants. In addition, an economic recovery and the low interest rate environment are likely to augur well for corporate earnings.
So, while a 3-5% correction can happen because of dull participation from FIIs during Christmas and profit booking by domestic participants, investors should look at it as an opportunity to buy equities, feels S Krishnakumar.
Ankit Agarwal, Fund Manager - Equity at UTI MF feels that the valuation would vary for each market segment. For instance, while the large cap space looks slightly overvalued, the small cap and mid cap stocks are fairly valued. And with a broad-based recovery in the market, these pockets can outperform the large cap. Therefore, rather than being fixated at the level of indices, investors should take a call based on their asset allocation. If equity has risen significantly in their portfolio, they can look to book profit. Else, they should stick to the asset allocation.
Krishna Sanghavi, CIO - Equities, Mahindra Manulife MF feels that the market will look expensive if an investor takes a short term view. However, from a long-term perspective, these are acceptable valuations. Therefore, a lumpsum investment with a 12-month investment horizon is not acceptable, while 3-year plus investment horizon is fine.
