Investors should SIP the volatile market: CIO View

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In this edition of Market Masterclass, Mahesh Patil, Chief Investment Officer, Aditya Birla Sun Life AMC, shared his market outlook amid the second wave of Covid-19 and strategy investors should follow.

Edited excerpts:

Q. Is the worst already priced in or is there more downside from here?

Patil: Markets are in the midst of a consolidation phase. There is concern on whether the recovery in the economy can get impacted due to this second wave. However, there is hope on the horizon that we will see an end to this. The concerns on healthcare infrastructure should ease in a month’s time with more companies joining the vaccination fray. While we do see a near term impact on earnings, the FY23 outlook remains good. I expect the Covid situation getting behind us soon and am on the growth outlook, taking into account the data indications coming from US, China. Markets are poised to go up if one looks beyond one quarter. I believe our GDP growth will be higher than pre-covid levels in 3-5 years  which will drive strong earnings growth.

Q. Investors have come back to equity MFs after eight months, as per March AMFI data. Do you see this sustaining keeping in mind the second wave and uncertainties?

Patil: Most investors lost out on the rally we saw after the March 2020 crash as there was still uncertainty on whether the markets will be able to sustain as the economy was fairly bad. However, we have seen in the last 2-3 months that many sectors are inching back to pre-covid levels and therefore confidence among investors is returning. Over the medium term, once the economy also recovers, investors will come back to markets. On the other hand we did see more money flowing in direct equities vs mutual funds in the rally last year. However, I believe most of the redemptions are done now. SIPs – the steady flow is expected to continue. I also expect equity mutual fund inflows to be better than last year.

Q: How should new investors begin their MF journey in the current markets scenario?

Patil: For new and young investors looking for investment opportunities, there is a long runway for them and they must continue to invest even at these levels . We are at the beginning of a new economic cycle and I believe markets should deliver reasonably good returns. Keeping in mind, however the the near-term uncertainties, one should not go aggressive. SIP is the best way for investors to beat the market volatility.

Watch the full interview here: