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Domestic equity markets have cracked around 5% from their all-time highs level. Rising Covid-19 cases in multiple states and concerns related to valuations are weighing on market sentiments.
So, where is the market headed and how much amount an investor should put in equities and other asset classes? Andrew Holland, CEO, Avendus Capital Alternate Strategies, shares his insights with Money9.
Edited excerpts:
Q: Can we expect a further correction in the market?
Holland: The recent dip in the market is more to do with the global factors rather than local ones. We have seen bond yields hardening in the US. We can’t have continuously rising stock markets and bond yield at the same time. We can expect a 5-10% correction from all-time highs. However, the long-term picture of India stays intact.
Q: Is there any discomfort as far as valuation is concerned?
Holland: Earnings will increase by 20-25% in FY22 and there are hopes that the trend will remain the same thereafter. Therefore, considering earnings growth momentum, finance minister measures in the Union Budget and some positive signs in the real estate which is picking up look promising. All these will have a multiplier effect on the economy. Overall, I think the present valuations are not high. I think
Q: Should investors buy this dip?
Holland: Interest rates are likely to stay low in the short-to-medium term. Robust inflows by foreign investors and spend power of millennial will continue to support Indian equities. The US has around 60 million millennials, while India and China have 330 million each. Considering the ongoing economic recovery, investors should focus on sectors like banking, industrial, energy and consumer discretionary. Timing the market comes with a danger. Therefore, I prefer SIP for the long term. The investment instrument helps to navigate the ups and down of the market.
Q: How should one allocate a portfolio considering the present market condition?
Holland: At this stage, I advise to put 70% money in largecap mutual funds or stocks, 20% in midcaps and the rest in smallcaps.
Q: What is your view on cryptocurrencies?
Holland: Investment in equities depends on your age. However, one can put 15-20% of the money in alternative asset classes that can range from wine to arts and cryptos. Unfortunately, I am not positioned in bitcoin. It has to be less volatile to be accepted as currency.