No aggressive buy-the-dip say experts as market corrects amid Ukraine tensions
As the Nifty corrects around 15% from its all-time high of 18,477 in October 2021 following the conflict in Ukraine, experts suggest a cautious entry into equity mutual funds. However, the experts who spoke to mint did not call for an aggressive ‘buy low’ strategy.
Some market participants also view the correction as relatively shallow and therefore not deserving of a significant shift in asset allocation towards equities.
“I recommend to our clients a cautious entry into large cap funds. I don’t think anything substantial has changed due to the Ukraine dispute, as far as equities in India are concerned. Something similar has happened during the Kargil War and the markets have come a long way since then,” said Amit Bivalkar, MD and CEO of Sapient Wealth.
Large-cap equity funds tend to be less risky than their mid- and small-cap counterparts. On the other hand, some experts felt that the correction is not deep enough to deploy lump money in the stock market. “I’m not really suggesting a flat-rate rollout just because the markets have fallen. The fall in the markets is nothing out of the ordinary. Of course, my customers’ existing SIPs and STPs 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 each month. STPs are a vehicle similar to SIPs, typically transferring a fixed amount from a debt fund to an equity fund at regular intervals
Investors should invest in stocks based on their risk profile and time horizon. Stocks generally operate on time horizons of seven years or more and tend to be high-risk investments. For more cautious investors, hybrid funds such as Balanced Advantage Funds (BAFs) may offer a less risky route to entering the stock market.
The correction in Indian stocks comes after a huge rally in stocks over the past two years since the covid-19 pandemic. The Nifty has more than doubled from the pandemic low of 8,083 to a high of around 18,477 in October 2021. Benchmark Nifty returns stand at a respectable 11% even after the current correction in the Marlet. A large number of retail investors have entered the market over the past two years, as evidenced by the opening of a record number of demat accounts. However, these investors have not experienced significant volatility in their investment journey, making it difficult to predict how they would react to a sharp market correction.
Never miss a story! Stay connected and informed with Mint. Download our app now!!