During high stock markets volatility, triggers for which could be anything ranging from political unrest to policy uncertainty, many investors get spooked and starting changing their investment strategies. According to Nimesh Shah, managing director & CEO at ICICI Prudential Asset Management Company, the best strategy for any novice investor during volatile times is to invest in balanced advantage category of funds. Shah told The Indian Express that this category of funds helps investors navigate volatile times with ease, as these would invest across equity and debt, irrespective of the market levels.
In February 2016, when the Sensex was hovering at 23,000, the exposure in balanced advantage fund was 76%, while equity exposure was as low as 30.13% when the markets rallied and the Sensex had touched the peak of 38,920, thus helping the investors in the ensuing market correction, Shah, who manages assets worth over Rs 3,10,000 crore at India’s largest fund house, said.
“Now when the market has seen some correction, the equity allocation has gone up slightly. So, this strategy of managing risks on either side of market excess has helped our investors,” he added.
While talking about investment in debt only, Shah said that the credit risk fund is the category of choice as these schemes look at the financial papers in the debt market – which is typically corporate bonds – and invest in AA and below rates corporate bonds. On the other side, investors mulling to invest in equities for five years and more can invest in SIP (Systematic Investment Plan) in mid and small-cap schemes, he added.
Meanwhile, when asked whether the mutual fund industry would be able to sustain the growth, given the current state of the liquidity crisis and market volatility, Shah said that the industry holds a lot of potentials and remains promising because mutual funds as investment products are still under-penetrated among Indian households. Though, efficiency has improved in terms of both time and case involved as the industry is going digital way.
“On the liquidity front, the MF regulatory framework is very robust and there have been no major issues pertaining to liquidity since 2008,” he added. While talking about the impact of higher crude oil prices and depreciating rupee, Shah said that rising trade protectionism, high crude oil prices and unwinding of quantitative easing by the central banks are some of the top concerns.