scorecardresearchMutual funds: Do the current valuations offer a good buying opportunity?

Mutual funds: Do the current valuations offer a good buying opportunity? Experts say this

Updated: 05 May 2023, 05:30 PM IST

To make the most of ongoing volatility, investors can stagger their investments across 20 to 24 weeks. This means they are advised to opt for SIPs (systematic investment plans) over lumpsum.

Following the rally in April, equities have entered a neutral buying zone

Following the rally in April, equities have entered a neutral buying zone

Amid ongoing market volatility, investors are recommended to invest in mutual funds for attractive valuations they offer, say investment advisors.

Although broader market indices have been rising for the past one month, pushing the valuations upward and bringing them in a ‘fair’ zone, albeit not attractive any more.

Sridharan S., founder and principal officer, Wealth Ladder Direct, says the current valuations are not discounted, but fair.

From that perspective, young investors still can buy but in a staggered way. This is not the right time for lumpsum investment, he says.

Akshar Shah, founder and CEO of Fixed, an investment technology platform also holds similar views about the current valuations.

“After the sharp rally in April, equities have come towards a neutral buying zone with risk and rewards are balanced. Investors with fresh deployment should stagger investments today. Those looking to mitigate risks and also play for upside should look at equity savings fund or balanced advantage funds today,” says Mr Shah.

“Apart from valuations, the macro-economic factors are conducive for the overall market scenario. From monsoon forecast to GST collection and growing interest of retail investors -- there are a number of reasons to feel optimistic,” says Chokkalingam G, Founder, Equinomics Research & Advisory.

How to invest?

The better alternative is to invest via SIPs (systematic investment plans). To be able to make the most of volatility, investors can stagger their investment across 20 to 24 weeks, Mr Sridharan says.

“This is the year of accumulation. Investors can accumulate assets over the next six months,” he adds.

Which categories are attractive?

About the category of mutual funds, he says that investors can invest in the large cap and mid cap.

“FIIs started pulling out in October 2021. Now this is the election year and there are worries over recession but FIIs will return again, may be next year, and that would give a push to large caps and some quality mid-caps. Then these categories would move upward significantly,” he says.

Mr Chokkalingam, however, is not too optimistic about the large cap funds.

Majority of sectors, he says, are facing problems of their own and are unlikely to give double digit growth. “There is more upside in small and mid-cap when seen from the number of opportunities available and relative valuation. However, one should not invest more than 30-50 percent of equity corpus in these categories,” he says.

“Investors should have an appropriate asset allocation based on their risk profile and investment objectives. Multiple studies have found asset allocation to be the most important factor influencing long-term portfolio performance,” says Misbah Baxamusa, CEO of NJ Wealth.


Index funds are mutual funds that replicate the portfolio of an entire index like Nifty50. 
First Published: 03 May 2023, 01:58 PM IST