Good time to park funds in debt, but hang on to those shares

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Uncertainty in the market may be spooky but historical data shows that equities have generated high returns after a period of depression. Uncertainty in the market may be spooky but historical data shows that equities have generated high returns after a period of depression.
SummaryHistorical data shows equities have generated high returns after a period of depression.

result of this 25 basis points hike in the rates.

What should you do?

Equity investors

With the recent fall in the markets, the Sensex return over the last one year has turned almost flat and the one year returns as on Friday stood at only 3.8 per cent. Investors tracking their investment value may get a feeling that they took wrong investment decision, but the decision is not necessarily a bad one unless you decide to sell your holding or redeem your units.

Historical data shows that equities have generated high returns post a period when the sentiments have been very low on markets and they are down — be it after the Harshad Mehta scam in 1992 or the period after the global financial crisis in 2008.

We are currently in one such phase. The currency has depreciated, the GDP growth numbers are on the lower side, interest rates are high and the current account deficit remains high. So even as there is no macro validation for markets to bounce back, experts feel that the numbers can’t keep deteriorating at the same pace and the price points make a case for investment.

“The market still looks to be range bound as we still don’t see low interest rate regime which is structurally good for markets. While we are at the lower end of the range, if there is further correction in the next couple of months, it would be better,” said Anup Maheshwari, head of equities and corporate strategy at DSP Blackrock Mutual Fund.

Markets have already fallen significantly and while defensive stocks too have taken a tumble, experts feel that investors can look to enter the market. While systematic investment plans should be continued and can even be increased, investors can even look to park part of their lumpsum investments into mutual funds.

“SIP’s should not be timed and logically when the markets are down one should look to increase the SIP investment. At some point in the next 3-5 years when the markets are high, investors will see the benefit of such investment,” said Maheshwari.

Debt Investors

Over the last one month, a series of liquidity tightening measures announced by the RBI to address the decline in rupee against the dollar have resulted in a rise in interest rates and therefore have translated into mark-to-market losses in the returns generated by debt funds over one and three-month period.

The measures are not expected to last

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