The benchmark equity markets index, the Sensex breached 80,000 on July 3 and though it declined below that psychological level at the end of trading, the very next day, it closed above 80,000.
While the meteoric rise of the index fuelled by liquidity has surprised even some veteran investment strategists, the moot question is what would mutual fund investors do in this season of over-stretched valuations?
One significant point to note is that while the market was rising with such extraordinary rapidity – the last 10,000 points was scaled in less than seven months – investment through the SIP route kept rising each month and in April it crossed Rs 20,000 crore (Rs 20,371 crore) for the first time and rose to nearly Rs 21,000 (Rs 20,904 crore) in May.
“Sustenance of these flows is likely to drive overall SIP flows to Rs 2.3 lakh crore in calendar year 2024. Total inflows into equity schemes and ETFs have seen two times rise since the start of the year 2024 indicating the rising strength of domestic investors,” said ICICI Securities.
Invest systematically
Shrikant Chouhan, who heads equity research at Kotak Securities is quite clear in his advice. “Based on the current domestic macros, our advice is to continue investing systematically in equities with a long-term perspective,” Chouhan told a section of the media.
The MD of Kotak Mutual Fund and one of the gurus of mutual fund investment Nilesh Shah describes investment as a journey and not a destination.
“This journey is both forward as well as backward…. Invest in the market as per your risk appetite, have a long-term horizon, significantly moderate your return expectations and follow the dharma of asset allocation,” Shah told the media recently.
SIP is the key
The beauty of SIPs is they are all-weather friends. The power of cost averaging is unleashed when the market turns volatile or undergoes corrections.
“Continue SIPs with a long-term outlook. If there is a correction in the market, which could happen after the budget, your SIPs will only end up buying more units at the same investment,” said Prasunjit Mukherjee, CEO of Plexus Management Services.
“These investors understand markets tend to move upwards over the long term despite the short-term fluctuations. Frequent rebalancing just looking at the index can bring in more anxiety and may reduce the compounding impact in the long term,” said Ravi Kumar T V, founder of Gaining Ground Investment Services.
In short, embrace SIPs tightly.
But before making any investment decision it is always prudent to consult a qualified investment advisor.
While valuations are over-stretched in this liquidity-driven rally, long-term investors need not fear. The clear advice of experts is to be systematic and disciplined in investment and avoid frequent rebalancing of mutual fund portfolio. Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
