No aggressive ‘buy-the-dip’ say experts as market corrects amid Ukraine tension
Premium- Some market participants also view the correction as relatively shallow and hence, not worthy of a large shift in asset allocation towards equities
With the Nifty correcting around 15% from its all-time high of 18,477 in October 2021 on the back of the Ukraine conflict, experts suggest a cautious entry into equity mutual funds. However, the experts who spoke to Mint did not call for an aggressive ‘buy the dip’ strategy.
Some market participants also view the correction as relatively shallow and hence, not worthy of a large shift in asset allocation towards equities.
"I am recommending a cautious entry into large-cap funds for our clients. I don't think anything substantial has changed due to the Ukraine conflict, as far as equities in India are concerned. Something similar happened during the Kargil war and the markets have come a long way since then," said Amit Bivalkar, MD and CEO, Sapient Wealth.
Large-cap equity funds tend to be less risky than their mid- and small-cap counterparts. On the other hand, some experts were of the view that the correction is not sufficiently deep for deploying lump sum money into the stock market. "I am not really suggesting any deployment at lump sums just cause the markets have dropped. The fall in the markets is nothing to write home about. Of course, existing SIPs and STPs of my clients will continue and benefit from the fall," said Ravi Saraogi, co founder, Samasthiti Advisors.
SIPs or Systematic Investment Plans invest a fixed amount in the stock market every month. STPs are a vehicle similar to SIPs, generally transferring a fixed amount from a debt fund to an equity fund at regular intervals
Investors should deploy money in equities in sync with their risk profile and time horizon. Equities generally work for time horizons of seven years or more and tend to be high-risk investments. For more conservative investors, hybrid funds such as Balanced Advantage Funds (BAFs) can provide a less risky route to enter equity markets.
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The correction in Indian stocks comes after a huge rally in stocks over the past two years since the covid-19 pandemic. The Nifty more than doubled from the pandemic low of 8,083 to reach a high of around 18,477 in October 2021. Returns in the benchmark Nifty stand at a respectable 11% even after the current market correction. A large body of retail investors have entered the market over the past one-two years, evidenced by the opening of record numbers of demat accounts. However, such investors have not experienced significant volatility in their investment journey making it difficult to predict how they would react to a steep market correction.
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