This is not the right time to look at the commodities as one spot, though it could potentially rise in the short term. Oil is now galloping towards $140. It would not be a good idea to look at things as opportunities. If someone has invested then it is ok. Somebody will make money. No problem, but not at all, from the investors point of view,” says A. BalasubramaniamMD & CEO, Aditya Birla Sun Life AMC,
People are calling it a ray of hope but I would say this is the biggest storm which is supported by domestic institutional investors and they are buying this fall and SIP investors instead of taking myopic view about yesterday and today asset Let’s continue to focus on allocation. Do you think DIIs are supporting the market? Are SIP investors here or are you afraid of redemption? The sharp fall in the market over the past two weeks has created some panic for direct equity investors. At the same time, investment for investors coming through mutual funds (and we are one) is on the rise.
Generally we all encourage SIP as an asset class or maybe as a step up investment. When the market falls, perhaps they should increase the allocation for mutual fund equity schemes. We are also seeing positive responses from both the distribution community as well as the investor community. But having said that, it is generally known that there is also a huge pool of funds coming into the equity market through direct participation. Now they are also realizing that investing through mutual funds can be a better idea as ultimately asset allocation is important.
From a broader perspective, the downside is certainly not being viewed as something where one should take money and certainly as a scope for allocating it to equities from a long-term perspective. The fear of war – be it World War I, World War II or any kind of war – has bounced back after seeing a sharp drop in the markets, given that historically whenever there has been such a sharp decline. This is now being recognized and felt by the investor base and community and the push to invest.
Many new investors have gotten used to a kind of moving market. They will be scared when they see this recession. Sensex is below 53,000, Nifty has left at 16,000. 5 per cent fall in stocks like ICICI and Maruti, oil is not at the level since 2008. What should be the strategy now? You have named a few where price corrections are quite sharp. A large part of this is bull liquidation which has come from foreign investors. We have seen about $14 billion inflow from FIIs. They are doing about a billion dollars in sales a day. But having said that, there is significant liquidity coming from FIIs and banking as a sector is around 35% of the size of the index and hence they are bearing the brunt of the fall.
Outcome: One, the Indian market has seen a significant outperformance over the past year over the global market, which seems to be correcting. The argument that the Indian market is trading at a premium to long-term valuations also holds true.
At the same time, we are on an economic recovery trajectory and the rise in commodity prices has put pressure on inflation as the rise in oil prices will impact India from a macroeconomic perspective. But of course the market correction has been quite rapid and so it makes sense to look at the broader market rather than looking at a specific sector.
Having seen quite a rapid recovery in the banking sector, it is something that is fundamentally very strong and hence should be looked at as a sector from an investment point of view as well. But certainly this fall should be treated as an opportunity. Second, staggering investments over the next one or two months; Third, your firm belief that this current war may not last very long and at the same time, the significant price increase may recover as quickly as the dust has settled. Fourth, one cannot wait for that time to happen to consider an investment.
While the multicap category and a large allocation to the broader markets aside, the one spot that has not delivered returns and has completely turned away investors is the debt category. Is it time to take a balanced approach to your portfolio and make some allocation towards debt as well? I think it makes sense to look at hybrid funds. Of course, hybrid funds that have a mix of equity and fixed income like a balanced advantage fund or even a balanced fund are potentially one of the options for investors to gain momentum in both equity and debt. can act as one.
But having said that, many conservative investors do not want equity exposure but are happy with the safety and liquidity at the same time and even though the returns are slightly lower than any other instruments, surely the 10-year bond is now approaching. Is. 6.8% and we are probably in a rate cycle that could potentially start rising over the next few months given the fact that inflation is very high.
Beyond a point the Reserve Bank of India or even the central banks globally cannot ignore rising prices from the point of view of monetary action and once we start seeing some hikes in interest rates, of course, The bond market will provide investors with an opportunity to look at debt. Temporarily as an alternative investment.
This is certainly applicable for those who are conservative, have reasonable exposure to equities and are now looking for balance in their portfolio. For them, it is understandable. But if one does not have exposure to equities or perhaps has bonds and is looking to invest in direct equities with the hope that they will make more money this way, the investor should look at mutual fund diversified equity portfolio whether it is Be it large cap, multicap or flexi. Hat, for that matter a small cap even from the overall point of view. Only debt matters to those who are overweight and are looking for balance in their portfolios and now it is providing opportunities as bond yields are much higher than market earnings.
Is this a good time to consider putting cash in commodities at the expense of equity? It is difficult to say, given the fact that the price movement in metals is quite sharp. In the last one week, there has been a sharp rise in the prices of nickel or other commodities. This is mainly due to the lack of supply and uncertainty in the world and hence there has not been much supply while the demand has remained constant.
I would probably assume that this is not the right time to look at the commodity as a spot, although it could potentially rise in the short term. Oil is now approaching the level of $140. It would not be a good idea to look at things as opportunities. If someone has invested then it is fine. Somebody will make money. Not a problem but from the point of view of investors, not at all.
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