Nifty @ 10000
“Nifty @ 10000”
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Buy Sell or Hold Mutual fund
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Indices have witness all time high in month of July. Every
day there is up movement in different indices. It took 90 days to nifty for
moving from level of 9000 to 10000 on index. Now what next? This is the major question coming to every
investors mind. Mutual fund investor’s preliminarily choose funds as investment
vehicle because they are not much aware about the markets or they don’t have
time to monitor market on regular basis but extra ordinary movement in market
has made them cautious.
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What to do on these levels of different indices?
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This is a most important question which every investor is
facing as of now. We have to understand different aspect of market. Markets
move on strong fundamental growth of economy, government decision making
ability and corporate earnings. We say that strong indices are reflection of
strong economy which is absolutely true also. When common man gives more weight
age to unassured returns in front of assured returns, it automatically gives an
indication that common man is ready to take on risk and reward formula. Today
if we see different asset class in short term, midterm and long term
prospective than we need to accept the fact that no asset class is able to
generate higher return than equities. People are ready to take a calculated
risk by solid diversification. People have shown their acceptance for equity
product as different aspect of economy and corporate earning is giving an
indication that India as economy is becoming super power. Our consumption level
with approx 1.34 billion population is very high. We are now ready to buy new
products every month or year. We as Indian started spending money on luxury
goods which was not much visible before 2000 era. So in total, spending culture
has changed along with earning levels of common man. Indian economy is growing
on pace of 7.5% GDP growth rate, our middle class and upper middle class has
more money for spending.
Markets moves on liquidity and it is happening as well. Now
investor doesn’t find much lucrative returns on FDs, Real estate & gold.
Investors are ready to take risk as they believe that in longer run equities
has always out performed any other asset class. Liquidity by way of SIPs and
Mutual funds aggressively coming in stock market. In Last quarter only our domestic
investors has pumped in equaling money in stock market with FII’s . We have to
accept this fact that aggressive liquidity is coming from FD liquidation and
other asset class. This trend is going to continue. As of now FDs and other
class returns are not even beating inflation which forced investors to look
equities as better investment vehicle. In month of June only, investors infused
4.9k Cr by way of SIP in stock market. This liquidity is huge for market and
that is the only and biggest reason behind extra ordinary movement in the
market and trust me this trend is going continue as risk and reward ratio of
equity market is suiting investors. We have to accept this fact also that SEBIs
push towards SIP investment has brought results in aggressive manner. Our
market has become more mature after 2008-2009 fall. Fundamental of economy,
corporate earnings has become most important aspect of Indian market. News flow
for common man has also helped investors to understand positive aspect and
negative aspect of different asset class.
With above table you can very well
understand that direct equities and mutual funds are better return generator
for investors with more tax efficient. High liquidity compare to other asset
class along with helping in goal achievement for longer run also made mutual
funds attractive asset class.
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Is this right time to invest?
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After reading first phase of article , we have to accept the
fact that we are in long bull run phase but that doesn’t mean that market is
not going to give chance to enter. High liquidity is going to take indices on
higher levels but you cannot and you should not time the market. Whenever you
try to time market you are going to lose and that is because as no one predict
market’s entry and exit levels. Timing the market is tedious job and for
avoiding this mutual fund is best product. We believe that after aggressive
rally market is bound to take correction but this time corrections will not be
steep. Corrections will be not beyond 3-4% for market. You can see small
correction starting after July derivative expiry. But each correction will be
followed by aggressive buying which will take indices on new levels. RBI is
going to be aggressive on rate cuts in coming quarters which help in corporate
credit take off and will help manufacturing industry. GST will help in better
corporate earning in third and last quarter. These entire factors will help in
taking markets on higher levels which helps investors in generating higher
returns.
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What should be strategy for investment?
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Risk and reward ratio is still favoring equity products so
question arises that what should be your strategy of investment?
1. Systematic investment plans: If you are a retail investor and
want to invest money on regular basis than choose this option. Don’t invest for
1-3 year horizon, invest for minimum horizon of 5 years and above. Results will
be better in 5 year plus period comparing to any other lesser period.
2. Systematic transfer plans: If you are sitting on cash and have
lump sum amount to invest than choose this plan for investment and for maximum
benefit try to choose daily or fortnightly STP for best of rupee cost
averaging. Monthly STP will not help as monthly STP is going to transfer fund
on one specific date on which you may or may not get lower NAVs. In daily STP
you will be able to absorb all corrections of market and it will also not delay
your investment transfer in equities for better return.
3. Systematic withdrawal plan: Like you choose vehicle for
investing money than you should choose plan for profit booking also. All equity
funds are free from exit load after one year but still our suggestion is this
to start your systematic withdrawal plan from 18 months onwards for taking out
your earned returns on your investment. And park these funds in lesser risky
products like MIPs, balanced fund or income funds.
4. Choose your target returns before
investment:
Higher returns are the main cause of high risk which converts into losses. Keep
your return target ready before investment. It will help you in minimizing risk
and will help you in taking best of funds for better results with consistency.
5. Distinguish between need and greed: There is thin line between need and
greed. Always keep a track of your need and cut down your greed by way of
profit booking ruthlessly. Decision making has to be very aggressive and it
should be quick. If you have achieved your targeted goals in Rs 10000 per month
then invest that much only. You should not squeeze your expenses for making
investment. Living life is also important part with securing future. 20% of
income invested properly can achieve your financial goals for long term.
6. Diversification: You are very much comfortable in
equity and you have seen best of result of equities in investment but this
doesn’t mean that balanced funds, MIPs or income funds are waste products.
Always give full diversification to your investment portfolio for risk diversification
and better result. Don’t diversify too much also as some times it kills returns
as well. 4-7 funds are best for diversification.
7. Don’t choose funds on basis of
returns: We
have a habit of choosing funds on basis of their returns in last one year or 2
year. It may backfire any time because in Bull Run few stocks becomes very
attractive in short term but in longer run they remain subdued. Suggestion is
to choose portfolio of scheme with consistency in fund returns from last 5 to
10 year. Before investment always check portfolio holding as well.
8. Financial planning: Last but not least, always take an
advice of financial planner, wealth advisor for making investment. No
investment can be done without knowing need and purpose of investment. If done
so than it will be direction less investment which will not fetch best of
result. Planner and advisor can assist you in different aspect of investment.
He can assess your risk profile, your long term, midterm and short term goals
of financial planning. Don’t choose product advisors as that is not going to
help you in financial planning achievement because he see product as selling
point not your goals.
These all are suggestion and outlook on market. We believe
choosing best of funds and assessing your risk profile will always helps in
generating better returns. Always keep an eye on fundamental of economy,
government decision making capability with liquidity availability in financial
market. Corporate earning is also key factor so always remain updated on news
flow for better decision making.
Disclaimer:
Mutual funds are subject to market risk, kindly read scheme related documents
before investment. Author Mr. Rohit Khandelwal is associated with www.moneymatters.co.in and AMFI certified mutual fund advisor. His ARN code is
121821.
All
views expressed in articles are author’s personal view. Moneymatters.co.in
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