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This is the right time for investors to increase equity allocation as Indian markets have gone through a reasonable time and price correction, said Prashant Jain, the Executive Director & CIO of HDFC AMC.
Jain advised investors to put money into equity funds in a phased manner in the next six months to take advantage of sharp dips. "But make sure that the money you put can remain invested for the long term," he said while addressing MFDs and investors at HDFC AMC's Mid-Year Review webinar.
The CIO said the factors which have led to this correction are unlikely to remain a problem for too long. "FII selling is likely to abate in months to come. I personally think the Russia-Ukraine crisis won't continue for too long. And if the tensions end, oil prices can cool down," he said.
He was the view that high inflation and interest rate hikes are unlikely to affect the profitability of Nifty50 companies and may even boost the bottom line for a lot of firms. "A third of the Nifty50 profit comes from banks, which are set to benefit from higher interest rate (as their margins would improve). The case is similar for commodity-linked businesses like oil, coal and metal (as inflation and higher-commodity prices go hand-in-hand). Another major Nifty constituent IT will also benefit due to currency depreciation (as high oil prices will lead to pressure on balance of payment)," Jain explained.
'Bank and power sectors fairly priced'
Jain said that valuations are no longer a concern as the market has gone through significant correction. However, not all sectors are fairly valued like capital and consumer goods, which continue to trade at a premium despite cost pressure, he said.
Banks, which have seen most FII selling, are reasonably valued given the improvement in their balance sheets and growth outlook. Power sector is also trading below the fair P/E multiple, Jain added.
Where to invest?
Preference should be largecap and multicap funds. Jain believes that largecap stocks are more attractive right now given that the economy is still facing multiple risks and FII selling has improved their P/E multiple.
