Equity Funds: What to expect in October?

September was quite an eventful one for the Indian equity markets. Events like rising inflation and oil prices, geopolitical tension and interest rate hike by US decided the course of equity markets last month.

While both the key indices Nifty and Sensex regained their all-time high levels, they headed downwards sharply over the last ten days.

Will the market continue its downward trajectory or will it bounce back strongly? Let’s hear from expert fund managers - Alok Singh of Bank of India MF, Shreyash Devalkar of Axis MF and Taher Badshah of Invesco MF.

Outlook

Alok Singh, Chief Investment Officer, Bank of India Mutual Fund

• The next three to six months may be driven by the corporate performance. From the Indian market's perspective, the next three to four months are very important considering the festival season
• While there are some global concerns, Indian equity markets have factored in these risks. Overall, the markets may remain positive in short term
• Market movement may be influenced by three main triggers – actions of central banks, quarterly performance of businesses and global headwinds like energy issues in Europe

Shreyash Devalkar, Senior Fund Manager, Axis Mutual Fund

• Foreign investors continue to favor Indian equities. This is evident from the fact that India saw net inflows of over Rs 6,000 crore (As on September 26, 2022)
• Rising prices of oil and food and depreciation of currency will decide the future course.
• While we keep a cautious eye on short term headwinds, we are optimistic on long term growth prospects of the Indian economy

Taher Badshah, President and Chief Investment Officer, Invesco Mutual Fund

• Ongoing uncertainty particularly related to the global economy will limit the return potential of equity funds for the remaining months of calendar year
• Indian markets may continue the currently rally only if inflation and fear of recession will be eased. Overall, in the short run, equity markets are likely to dominated by the incremental policy response of central banks to incoming data on inflation, growth and geo-politics
• Over the past one year, the midcap index has seen a reasonable outperformance to the frontline Nifty (+4.7%) whereas the small cap index has materially underperformed the Nifty (-9.5%). This probably makes small caps relatively more attractive v/s midcaps from a catch-up perspective

​Sectoral preference

Alok Singh

• We are bullish on financial, capital goods and autos.

Taher Badshah

• Our 'go to' sectors are I.T., metal/oil and banks

Fund recommendation

Alok Singh

• From a 3–5-year perspective, mid cap funds and small cap funds may perform better

Shreyash Devalkar

• Equity allocations need to be determined based on the risk profile of the investor. For investors looking for a one stop solution, a flexicap or multicap portfolio may be an ideal all-weather fund.

Taher Badshah

• At the current stage of the market cycle and prevailing economic conditions, we recommend investors and distributors keep well-diversified portfolios with balanced exposure across market caps