Rather than seeing Sensex levels to invest, focus on asset allocation to make money in markets, says S Naren, Chief Investment Officer, Equity, ICICI Prudential.
S Naren, Chief Investment Officer, Equity, ICICI Prudential Mutual Fund shares his perspective on markets with media at the launch of ICICI Prudential India Recovery Fund Series II fund. Here’s a summary of his outlook on markets and his advice to investors:
- Expect earnings growth to remain muted for the next two quarters due to bad Rabi crop, global problems and a possibility of rate hike in US.
- Interest rates are likely to come down in one year from now (if crude price doesn’t go up sharply). There is uncertainty over equity and debt market return potential in the next six months. Good returns can be expected from debt markets if the Federal Reserve governor says that she won’t hike rates.
- Invest in equity with a three year view and in debt with a one year view. Bullish on equity from a three year perspective due to improvement in earnings.
- In equity markets, even if crude oil prices go up to $120 levels, sometimes, the markets tend to rally because the sovereign money in foreign countries comes to India. During 2010-2013, when crude was high, Indian equities got huge inflows. Inflows in equities after the election have not been as high as people expected. Rather, fixed income has received better inflows than equities. Inflows in fixed income has benefitted by crude price fall. The risk for fixed income is rise in crude price.
- Retail investors should avoid investing in most aggressive equity funds at this juncture. Rather invest in large caps, balanced funds and hybrid funds.
- Correction is better for markets as investors tend to take undue risk if there is a sustained rally. Market predictions like Sensex at 60,000 encourage irresponsible risk taking among investors. Follow asset allocation to make money in markets.
- Contrarian calls : Gold and Inflation Index Bonds
