“Disciplined investment is the mantra to meet goals rather than letting fear deterring you away from the destination,” says Swati Kulkarni.
This is a prudent time to increase exposure to equity in a staggered manner. Volatility is a part of the share markets. Economy downfall, high inflation, bad IIP numbers are all waiting at our doors to knock and make the situation worse. But investors should not panic. Keep calm and take decisions one by one. This is the time when investors need to reshape their portfolio and make a judgmental call.
Due to the sharp fall in the equity market, valuation has become attractive at 1.9x, the Nifty 12-month forward P/B is also well below the historical average of 2.6x (assuming a 10% cut in our FY21 Nifty earnings estimates to account for the disruption due to the global pandemic) and Nifty 12-month trailing P/E of 16.2x at a 12% discount to its Long Term average of 18.5x and at levels last seen in Apr’14. Valuations are very cheap at present for investors. In the bond space, it would be advisable to have exposure in Corporate Bond funds / Banking & PSU Debt Fund which are comparatively safer as challenges to the economy are expected to increase shortly. Investors who have long term investment horizon can think of increasing exposure in equity.
One should consider current correction to increase their SIPs, MF equity, and asset allocation kind products in their portfolio. One should diversify the portfolio. So, it would also be advisable to have 10-15% of the portfolio’s allocation in the gold as an asset class. Gold is negatively correlated to equities. It performs exceptionally well during stock market crashes. This fund has seen an increase in allocation to equity assets to the maximum permissible level (as per the mandate) of 80 percent in March 2020. This allocation in January 2020 was only 45 percent. The increased allocation underlines the attractiveness of the valuations of the equity market. This is not the first time when the market is facing such problems, like every time this crisis will also come to an end but the patient investor who stayed invested has eventually made strong positive returns.
UTI Master share and UTI MNC fund predominantly invest in companies with a strong competitive franchise. Such companies are often referred to as companies with wide economic moats. They produce predictable incomes, have low influence and driving pieces of the pie with estimating force or cost advantage, and create a high or improving profit for capital utilized. We accept that such organizations are riches makers and wellsprings of alpha over the long haul. The speculation theory of the UTI Dividend Yield Fund is to put resources into organizations citing a high-profit yield and where the profit pay-out can increment with development in income. Hence, the portfolio allocation among different asset classes should also be person-specific.
