Creating your asset portfolio? Axis Securities’ B Gopkumar shares his strategy

The ongoing correction in the domestic equity market has put investors in a fix. An aerial view showed that nearly 55 per cent of stocks listed on the exchanges have eroded investors’ wealth since October 19, 2021, when the benchmark BSE Sensex scaled its all-time high of 62,245.43. However, analysts believe that this is an opportune time to build a portfolio.

In an interaction with Business Today, B Gopkumar, managing director and chief executive officer, Axis Securities said that the Russia-Ukraine conflict has allowed investors to increase the exposure to the currently under-allocated equity.

“Our investment strategy in the current environment would be to focus on fundamentals. We recommend staying invested as the long-term story for the Indian market remains intact,” he said.

Asset allocation strategy

While sharing the asset allocation strategy, the market watcher added that investors should focus on the asset allocation based on the risk appetite and the investment timeline. He advised aggressive investors to put 90 per cent of their wealth in equities and 5 per .cent each in gold and debt.

On the other hand, he suggested conservative investors to invest 20 per cent of their money in equities, 70 per cent in gold and 10 per cent in debt. For balanced investors, Gopkumar advised putting 50 per cent of wealth in equities, 35 per cent in debt and 15 per cent in gold.

Likewise, he advised growth investors to invest 70 per cent of their capital in equities and 15 per cent each in gold and debt. However, he also suggested risk-averse investors to avoid equities and invest 70 per cent in debt and 30 per cent in gold.

Where to invest?

Amid the ongoing uncertainty in the global equity market, Gopkumar believes that investors should focus on asset allocation and use this volatility to build long-term positions in quality large and midcap stocks as they become attractive after the recent correction and provide a good entry point.

The 30-share Sensex has plunged nearly 18 per cent to 52,842.75 on March 7, 2022 from its all-time high scaled in October last year. Likewise, the BSE Midcap has also dropped nearly 19 per cent from its lifetime high.

Gopkumar said, “Selected value stocks under metals, commodities and BFSI space are well-placed to deliver superior performance, particularly when we factor in the recent correction in the market.”

When will FIIs turn buyers again?

Sustained selling by foreign institutional investors (FIIs) and elevated crude oil have also weighed market sentiment since October. They have offloaded shares worth over Rs 1.29 lakh crore between October 1, 2021-March 7, 2022.

He thinks that FII flows in the emerging market will continue to be volatile till the US Fed announces the exact timeline of the rate hike. Most emerging markets are likely to see currency depreciation in the short term.

“Once we enter into a rate hike cycle (as the market knows the exact number of hikes in 2022 and the timeline for the same), the overall fiscal deficit and growth phenomenon will play out. FII will regain confidence in the emerging market, especially India, as robust earnings growth and economic recovery will playout for the remaining 2022,” Gopkumar said, adding the rise in crude prices could also delay the cool-off in inflation in the domestic market, which many expected to be moderate in the second half of 2022.

Market outlook

However, he continues to hold a positive long-term view on the domestic equity market. “The overall boost in the Union Budget 2022-23 expenditure will help deliver broad-based growth in FY23. Cumulative and rolling net profit of NSE 500 universe for the last four quarters touching an all-time high (crossed Rs 9 lakh crore in Q3FY22) is a key positive for the market. We expect Nifty may still hit 20,200 by December 2022,” Gopkumar said. The NSE Nifty index closed at 15,863.15 on March 7, 2022.