Home / Money / Personal-finance /  Market at new high: what should equity and mutual fund investors do?

Equity markets have risen to new highs. If you have already invested in equity markets, especially through equity mutual funds, what should you do now? Invest more, hold or book profits? And can new ideas still be available at reasonable valuations in this market?

Janakiraman R,vice president and portfolio manager- Franklin Equity, Franklin Templeton Investments— India

The Indian market has several long-term drivers which, when coupled with structural reforms, can provide attractive and sustainable earnings growth potential over the medium term. Moderate inflation levels, fiscal and current account deficits and policy reform measures to enhance efficiency and productivity of the economy provide a favourable macro-backdrop for corporate India. Hence we believe that from a medium-term perspective, the Indian market remains attractive.

As always, our advice to retail investors would be to invest in line with their financial goals and risk appetite, rather than market conditions. We recommend that investors come into equities with a 5-year investment horizon or more, and invest systematically. The latter can help deal with equity market volatility as well as provide benefits of the power of compounding. Diversified equity funds can be part of the core portfolio of all investors.

Neelesh Surana,chief investment officer-Equities, Mirae Asset Global Investments (India) Ltd

We would advise investors to hold on to their existing equity exposure but within the earmarked asset allocation towards equities. Market returns are a function of macros, future earnings growth and interest rates and flows—all of these, barring recovery in earnings, are favourable. While trailing price-to-equity (P/E) multiple may look high—the denominator (the earnings) is low as corporate India’s ROE (return in equity) is yet to revert to its long-term average. With significant improvement in macros, including global environment, we expect corporate earnings to improve over the next few years.

Enough opportunities are available in the market even at current levels. NAV returns for most funds are likely to be higher over the indices in the longer term. We would advise balanced allocation, more titled towards multi-cap funds. Overall, we expect meaningful returns to investors with patience.

Sohini Andani,fund manager, SBI Funds Management Ltd

Whether the valuations would sustain at current level, depends on how robust the earnings recovery is and how sustainable it will be.

If earnings growth is over 15-20% over the next 12 months and outlook for subsequent years is also quite robust, then there would be case for the current valuations to sustain.

Otherwise, we can see some market correction. Whether the investor stays in the market or not depends upon his/her current equity allocation in overall savings. If the allocation is low, s/he can use any corrections to increase allocation and if it is very high, they can book some profits or wait for some correction before making fresh allocation.

Anup Maheshwari,EVP and head-equities, DSP BlackRock Investment Managers Pvt. Ltd

There is no doubt that market valuations have risen considerably over the past few years. Valuations have risen higher in the smaller companies. When we look at existing investments in equity funds, we feel that the focus should be more on asset allocation rather than opportunistic buying or selling.

Too often, people get swayed by short-term market movements and lose perspective on the long-term asset allocation. If one is overexposed to equities at this stage, we would suggest trimming exposure, particularly through small-cap funds.

Large-cap valuations still look reasonable and one can hold on to those funds. We have observed that irrespective of overall market valuations, there are always some companies that can deliver returns based on bottom-up factors. The number of such companies tend to get lesser in such markets, but the opportunities exist.

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