MUMBAI: Investors, jittery about the present market situation, should not act out of fear, emotion or greed: This is the advice to them by people with decades of experience in the market.
According to Mukund Seshadri, partner, MSVFP LLP, during any sudden and major change in the market, like Covid, US market turmoil, the current tariff war, there’s a high chance for investors to react immediately. “Investors should avoid such knee jerk reactions to market-related events,” Seshadri said. “Usually the markets are volatile in the short term but to make money in the market, investors should have a long-term view,” he said.
Market players remind investors of the old saying: It’s not the ‘timing the market’ that makes money for investors. It’s the ‘time in the market’ that creates wealth for investors. Fund managers and financial advisors said investors with a financial plan for the long run, should stick to their asset allocation plan. Just because the markets are volatile, they should not react to it and change their asset allocation plan.
So where should investors with some funds in hands should invest. According to Prahant Jain, founder & CIO, 3P Investment Managers, in the current fall in the market, one should buy large caps. On the other hand, he says investors should avoid small and midcap stocks since most of those stocks still look very expensive, and risk-reward is not favourable.
Jain, who was the first fund manager in India to manage Rs 1 lakh crore worth of money across equity funds, listed several reasons for buying large caps. According to him, Indian goods exports to the US are only 2% of the country’s GDP, a small share compared to many other countries. The duty differential with India’s key competitors in goods exports, like China and Vietnam, has increased, putting India at an advantageous position.
Secondly, oil prices and US yields have fallen sharply. This is a material positive for India. Also given the volatile market conditions, companies taping the primary market for funds will not go there. So, the supply of stocks in that market will dry up, Jain said.
Since the US markets__a favoured destination for global investors to put money for the last few years-is now underperforming other markets sharply. This should lead to realignment of capital flows with India coming out to be a potential beneficiary.
Jain also thinks local fund flows will hold steady and should get deployed in the secondary markets, mostly in large cap stocks. While those who have funds can invest wisely, those who have recently come to the market and have never seen a bear phase, should reach out to an experienced advisor for help, rather than selling out, financial advisors said. Advisors can handhold such new investors to sail through the current rough phase, they said.
