'Investors should be very cautious of the underlying asset class and its product category'

Investors should be very cautious of the underlying asset class and its product category. As an informed investor, he should know the asset class cycle, underlying investments and probable risk in case of a trade war between the US and China post-COVID-19, Amit Jain, Co-Founder & CEO at Ashika Wealth Advisors said in an interview to Moneycontrol's Sunil Shankar Matkar.

edited excerpts:

Q) Do you expect the market rally to continue in May? Also is it a bear rally?

A) This rally apparently looks like a bear market rally which is more driven by news flow relating to the stimulus by government or possible cure of COVID-19 rather than fundamental recovery of the global economy. The rally may hold for short period, however, it may fizzle out once the technical factors in F&O market settle down.

Amit Jain

Co-founder & CEO|Ashika Wealth Advisors

• 'Good time to exit debt MFs, allocate 30% portfolio to equity MFs as valuations look fair'

Q) After a 32 percent rally from March lows, are you still advising clients to continue buying quality stocks?

A) If you see our last view shared with Moneycontrol, we advised 30 percent allocation in the market in the first week of April and the rest in a staggered way. We believe this strategy has worked very well for our investors and we continue to believe in the same strategy of staggering investments in next 6 months, as we are fearful of strong retaliation by America in form of Trade war or a currency war by the end of the year.

If any fresh investments are to be made, then we advise waiting for better entry points with the right diversification strategy in appropriate asset class.

Q) What are the major factors to watch out for in May on domestic as well as global front?

A) Globally we are expecting another stimulus package by central government. Also, there are high hopes in the market for vaccines and a possible cure for COVID-19 is around the corner. Once this emotional hysteria passes, the GDP numbers would be the next thing to watch out for. along with currency fluctuations, forex reserves and possible scope demand revival.

Q) Given the fiscal stress, do you think the government will be able to announce a large stimulus package for the economy?

A) Announcing a further stimulus is really critical for our economy and particularly for survival of some of the mid-sized industries. This further stimulus may affect our fiscal deficit negatively, however, we have limited options.

Our currency has already depreciated by 7 percent YTD which has already put pressure of 3.5 lakh crore of additional interest on foreign borrowings. So, in our view, the government should focus more on curbing the rupee depreciation and save outgoing interest cost on their foreign borrowings. This possible cost saving should be utilised by the government to provide further stimulus for the SME segment.

Q) What should be the investment strategy under current market and economic conditions?

A) In our view, investors should be very cautious of the underlying asset class and its product category. As an informed investor, he should know the asset class cycle, underlying investments and probable risk in case of a trade war between the US and China post-COVID-19.

As of now, we suggest that each investor should have the right asset class mix along with the right product category. Also, investors should know when they need to switch or exit from their existing portfolio. Investors should have an active approach and should rebalance their portfolio at medium-term intervals. Also, we advise, each investor should follow a systematic approach of investment rather than one-time investment.

Q) Have you seen any change in investor/trader behaviour in the last four months?

A) FOMO (Fear Of Missing Out) is what usually triggers these behavioural changes in investors. Investors should focus on building up the portfolio in a systematic approach by diversifying the investments across asset class, product categories and across the time period. Investors should understand the fundamentals of the underlying businesses & Industries and their Financials before investing in any mutual fund & stock category.