The market is in the uncertain territory and it will remain volatile going ahead but every correction is an opportunity to buy as India remains one of the best growth stories, said Nilesh Shah, MD, Kotak AMC, in an interview with ET Now.
"There is uncertainty ahead. There is volatility ahead, but every correction is a great opportunity to buy in India’s growth story," Shah told ET Now.
Shah's comment is in sync with most analysts who believe that the Indian market is better placed among emerging markets and the correction should be used as an opportunity to invest in quality stocks.
Shah said he has been buying in the market on the correction in stocks where he believes valuations are fair.
"We are not oblivious to the fact that there is a lot of uncertainty ahead and there could be volatility. We have advised our customers that this is the time to be equal weight to the equity allocation, be marginally overweight large-cap, be marginally underweight small and midcap but invest in every correction with a longer-term view," he said.
In the current market scenario, the balanced advantage funds and asset allocator funds offer better opportunities as these funds allocate between debt and equity based on the valuation of the market.
"In January 2019, our balanced advantage fund had 39% allocation to equity. In March 2020, as the markets corrected, it went up to about 75%. Today it is at 50%. So depending upon the valuation and the movement of the market, a balanced advantage fund can cushion the market. In a rising, expensive market, they will be sellers, in a falling market they will be buyers," Shah said.
Balanced advantage funds are also called dynamic asset allocation funds considering how the money is invested in equity, debt and arbitrage components. There is no restriction on asset allocation, which means that the fund managers can easily switch between the investments depending on the market’s direction.
Fund managers decide on money allocations based on key indices and how they predict stock valuations in near future.
Disclaimer: This article is based on an ET Now interview. The views and recommendations made above are those of the analyst and not of MintGenie.