Vinit Sambre, Head of Equities at DSP Investment Managers, believes long-term investors should not make drastic changes to their portfolios in response to short-term events. Instead, they should focus on building a well-diversified portfolio.
"For long-term investors, it is generally not recommended to make drastic portfolio changes in response to short-term events like geopolitical tensions. Instead, long-term investors should focus on building a well-diversified portfolio that can weather various market conditions," Sambre said in an interview with the economictimes.com.
Sambre highlighted that geopolitical tensions, economic indicators, company earnings, and other factors play a significant role in determining market performance.
He believes one should invest regularly in a mix of different asset classes through systematic investment plans (SIPs).
"One effective strategy is to invest regularly in a mix of different asset classes, such as stocks, bonds, and gold, through a systematic investment plan. This approach helps to mitigate risks and smooth out volatility over the long term," said Sambre.
Sambre is of the view that the Indian market can keep itself aloof from the risks arising from high inflation and the global economic slowdown which could cause a ripple effect in India.
Sambre pointed out that inflation has reduced consumer spending, particularly at the lower end of the income spectrum, which could have some adverse impact on corporate earnings.
He attributed the exodus of foreign capital to the rich valuation of the domestic market.
He pointed out that in October 2022, India's relative valuation compared to its emerging market peers reached an all-time high, with the market trading at a 90 percent premium and even though it has now declined to the mid-50 percent range, it is still slightly above the long-term average of approximately 41 percent.
"This has caused foreign institutional investors (FIIs) to strategically allocate their funds to other emerging markets, aided by a rebound in other economies, particularly China's reopening trade. We anticipate that FII outflows will slow down, and as valuations become more attractive, FII inflows may return to India. In addition, higher fixed-income yields in the US may draw investors with lower-risk appetites,' said Sambre.
Commenting on the recent buzz on extending the market hour, Sambre said it can offer the advantage of improving market liquidity, which would help in better price discovery. Moreover, many global stock exchanges operate for longer hours, so extending market hours in India can align the country's equity market with international practices, he said.
Sambre added that longer trading hours may provide more significant opportunities for investors who cannot participate during regular trading hours.
However, he highlighted the downside also such as more volatility and heightened regulatory oversight.
"A possible downside is that increased trading time may result in more price fluctuations, leading to greater market volatility. Furthermore, it could also necessitate heightened regulatory oversight to ensure compliance with trading rules, monitor market manipulation, and prevent insider trading," said Sambre.
Disclaimer: This article is based on an interview done by economictimes.indiatimes.com. The views and recommendations given in this article are those of the expert. These do not represent the views of MintGenie.
