The stock markets have turned choppy in the last few months, with the Sensex plunging to near seven-month lows. The share market is likely to remain volatile over the next few months, as currency depreciation, rising yields and upcoming Lok Sabha elections add uncertainty, says G Pradeepkumar, CEO, Union Mutual Fund. At such a time, retail investors must exercise caution while investing in small cap and midcap funds, G Pradeepkumar says. The minimum period for equity investments should be at least three years, says. \u201cIn fact, meaningful returns can be expected after five years. Anything less than that should normally be met by fixed income funds,\u201d G Pradeepkumar says. He advises investors to continue to invest through SIPs in a disciplined way. Also read:\u00a0Share market LIVE updates: Sensex recovers slightly from 1,000 pts plunge, Nifty nears 10,200; financials slip Sushruth Sunder of FE Online recently interviewed G Pradeepkumar, CEO, Union Mutual Fund, who shares his outlook on the stock market, rupee depreciation, the recent correction, impact of the 2019 election and guidelines for creating asset allocation. Here are the edited excerpts: After soaring to record highs, the stock markets appear to have turned choppy. What is your outlook on the direction of Sensex, Nifty in the near term? We expect markets to be volatile over the short term. The recent currency depreciation and rising yields are likely to exert pressure on equity markets, while corporate earnings expectations could provide some support. Additionally, political uncertainty emanating from upcoming state and union elections, might heighten the volatility. Rupee has plunged to below the Rs 74-mark against USD. Do you expect recovery anytime soon? Which sectors can investors focus on now? Over longer periods of time, we expect Purchasing Power Parity (PPP) between two economies to determine the relative currency movement. Historically, Rupee has largely reflected that in its long term depreciation against the USD. We expect that structural movement to persist. Over short to medium term, we expect foreign portfolio flows, regulatory intervention and forex hedges, to determine currency volatility. While a cheaper Rupee in itself is not necessarily a bad thing, the Reserve Bank of India (RBI) is likely to step in to prevent excessive volatility in the Rupee. Any intervention by RBI could lead to short term recovery for Rupee. Export oriented sectors like Information Technology (IT) and Pharma might benefit from Rupee depreciation, depending on the hedges in place. However, we emphasize that investors should consider business fundamentals in their decision making, rather than be purely driven by currency movements.\u00a0We are overweight on IT and Pharma, based on their strong business fundamentals and attractive valuations, aided by favorable currency tailwind. Given upcoming 2019 elections, how should retail investors approach the stock market now? In your view, what could be the likely impact of elections on stock market? Retail investors should consider equity investments depending on their financial planning and asset allocation requirements. Near term events such as \u201c2019 Elections\u201d should not be drivers of investment decisions. Instead, investors should consult their financial advisors for the right asset allocation strategy to accomplish their respective financial goals, and then follow a systematic and disciplined allocation. For those investing through Systematic Investment Plans (SIPs), it is important that they stick with their SIPs. We expect upcoming state and union elections to add to the short term volatility in equity markets. However, it has to be remembered that in the past also, while there has been volatility around elections, the market has invariably recovered and grown more or less in line with the growth in earnings of companies. A recent AMFI report noted that a whopping 51% of equity assets get withdrawn before a year gets over. Is there an ideal holding period in case of equity\/debt mutual funds?\u00a0 There is no standard holding period that one can suggest. However, the minimum period for equity investments should be three years. In fact, meaningful returns can be expected after five years. Anything less than that should normally be met by fixed income funds. Liquid Funds are ideal for very short term requirements. Again, it really depends on the goals and the financial plan for the investor. The ideal thing for a retail investor would be to take the help of an advisor, prepare a financial plan and stick to that in a disciplined way. Can you provide some broad guidelines for creating an asset allocation mix for retail investors? No one size fits all. Different investors would need different asset allocation mix depending upon their risk tolerance, time available, taxation and more importantly, their financial goals. For young investors we would normally advise to allocate larger portion of their investments to equities and the rest in fixed income products. With age, the proportion to risky assets such as equities would normally come down. These days there are products from the industry that take care of asset allocation. Examples would be Balanced Advantage Funds or Equity Savings Funds.