scorecardresearchExperts suggest avoiding going overweight on equities, especially hot themes

Experts suggest avoiding going overweight on equities, especially hot themes and sectors: Report

Updated: 19 Jul 2023, 11:34 AM IST
TL;DR.

The Indian equity market is currently witnessing a strong upswing, however, experts suggest that retail investors need to maintain a cool head in a market that could heat up further, a report by Business Standard stated.

Avoid going overweight on equities, especially hot themes and sectors, say experts

Avoid going overweight on equities, especially hot themes and sectors, say experts

The Indian equity market is currently witnessing a strong upswing, however, experts suggest that retail investors need to maintain a cool head in a market that could heat up further, a report by Business Standard stated.

Some analysts are of the opinion that the Indian market is on the threshold of an extended bull phase, stated BS, adding that previously, due to soaring commodity prices and higher interest rates, the profit margins of Indian companies had squeezed. However, a favorable macroeconomic environment is likely to support the bull run, highlighted the report.

The current rally is being fuelled by robust foreign institutional investor (FII) flows attracted by India’s strong economic fundamentals, further stated the report.

However, experts cautioned BS that a few global issues persist. Kaustubh Belapurkar, director-manager of research at Morningstar Investment Advisor, noted that inflation in developed countries needs to be monitored closely.

Similarly, global geopolitics continues to pose risks and a sharper-than-anticipated global economic slowdown could impact inflows, stated the report.

“Moreover, if the Indian market is perceived as overvalued, FII flows could be affected,” warned Arun Kumar, head of research, Fundsindia.com, as per the report.

Valuations

The report further stated that the substantial FII flows of the past three-four months, coupled with steady domestic institutional investor (DII) flows, have pushed valuations up.

“Although valuations have risen, we are currently in the initial to mid-stages of the earnings growth cycle. There is ample room for earnings to grow further. And, market sentiment is positive but not over-exuberant,” says Kumar, the report added.

Experts suggested that investors should remain focused on their asset allocation and rebalance, if required, adding that investors should stay diversified across asset classes. And those with a lump-sum amount should stagger their investments, it said.

“If, say, your original equity-to-debt allocation of 70:30 has moved to 80:20, book profits in equities. And, restore the equity allocation to 70 percent,” Belapurkar was quoted as saying.

The report further recommended that investors should be cautious not to become overly invested in equities, especially in segments that are performing well, such as mid and small-caps.

Finally, avoid market timing. “Don’t exit the market in the hope of re-entering at lower valuations. If the market does not return to current or lower valuations any time soon, you might capitulate and enter at even higher levels,” says Kumar.

 

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When the rupee falls, one can explore the IT sector to invest. 
First Published: 19 Jul 2023, 11:34 AM IST