If you have understood the market dynamics and are waiting for a correction to invest at lower levels, then here is your chance. The benchmark indices of the Indian stock market – Sensex and Nifty – have fallen by about 5% in the last one week. However, before making fresh investments, investors need to ensure that their asset allocation strategy is correct based on the risk profile.
“The current macroeconomic and market dynamics provide an opportunity to rethink strategic allocation,” said Abhilash Joseph, Business Head – Finity.
Association of Registered Investment Advisors (ARIA) board member Vishal Dhawan said that despite the correction, the markets still look overvalued. He said that dynamic asset allocation/balanced advantage funds should look for opportunities to hedge against downside in market corrections.
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Shaji Kumar Deokar of IIFL Wealth suggests Quant Funds during market correction. “With their non-discretionary, rules-based approach, quant funds may be better suited to stock selection and better manage portfolio risk,” Deokar said.
Since the correction is across the market-cap, investors can consider investing in broad-based index funds. However, experts have a different opinion on this.
Vikas M Sachdeva, CEO, Emkay Investment Managers, said, “In a market like ours, which is a delight for alpha seekers, I would bet on a portfolio of high quality stocks with a focus on quality.
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On the other hand, Vishal Dhawan said, “Index funds are a good option considering both Nifty 50 and Nifty 500 as well as global indices like S&P 500 and MSCI World Index.”
He said, “Since the markets are still at a premium, one can gradually add to the index fund through a SIP (systematic investment plan) or STP strategy so that an investor can normalize the premium valuation while continuing to buy. “
“We recommend using index funds for large-cap allocation and actively managed schemes for multi-cap/mid-cap and small-cap allocation,” said Vaibhav Porwal of Dezerv.
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