Nifty @ 10000
“Nifty @ 10000”
Buy Sell or Hold Mutual fund
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.
What to do on these levels of different indices?
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.
Is this right time to invest?
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.
What should be strategy for investment?
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 doesn’t guarantee accuracy of views.
Moneymatters.co.in doesn’t guarantee any return. Reader’s view is at his own discretion. Moneymatters.co.in will not be liable for any losses due to author’s view.
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