Time for systematic investing in equity, debt funds

Mumbai: At the onset of the pandemic in March 2020, equities globally faced a sharp correction. Indian equity markets were no different and lost over 30 per cent within a span of few weeks, slipping to a low of 26,000 level on the S&P BSE Sensex. As a means to support the local economies, global central banks took on to quantitative easing thereby flooding the market with a gush of liquidity. Indian equities too were a major beneficiary of this liquidity and equity markets made a sharp reversal to record new all-time highs.

Amidst this, while there was mayhem in the market, veteran fund manager S Naren, ED and CIO, ICICI Prudential AMC, spotted an investment opportunity and gave a bold call.

In an interaction with Bizz Buzz, Naren, said: "The correction was a once in a decade investment opportunity for equity investors. His words proved to be true as equity markets made a sharp reversal and rallied continuously over the next two years."

With the liquidity tap being on, soon valuation of equity markets across developed and emerging economies became expensive, including India. At that stage, there was euphoria among retail investors and many of the new age company IPOs saw record subscription. Naren seeing this euphoria cautioned investors that investing in a single asset class like equity is not risk-free.

So, when Indian equity markets hit an all-time high in October 2021 with the S&P BSE Sensex hitting 62,245 level, Naren stated that while the long-term view on equity remains positive, the medium-term view has turned cautious due to valuations moving higher. At that point he recommended, opting for dynamically managed asset allocation scheme or multi-asset scheme. A similar view was carried across in their annual outlook at the start of 2022.

Through the course of these developments, one fund house which got its call right for its investors was ICICI Prudential Mutual Fund. Investors who paid heed to the warnings and investment suggestions presented by the fund house were left in a fine fettle. The stellar performance of various schemes across equity and hybrid of ICICI Prudential is a testament of the robust processes the fund house relies upon in delivering optimal risk adjusted returns to its investors.

A look at the performance of the biggest schemes across equity and hybrid category shows that, ICICI Prudential since the pandemic induced correction has delivered a very encouraging investment experience across categories.

While the pandemic receded, the world today is once again facing a major geo-political challenge in the form of Russia-Ukraine conflict. In response to this development, Indian equity markets in line with global markets have turned volatile.

"Post the recent market correction, we are no longer negative on equities. However, for the market to deliver returns, the Ukraine conflict has to resolve. So, the near-term prospect of the market is totally dependent on the outcome of the Ukraine issue," observes Naren.

He further adds, "if the Ukraine issue is resolved there is a possibility of a sharp trading rally. Once this trading rally happens, markets will refocus on old issues like Fed hiking rates, etc., which could result in another bout of market volatility. If the issue escalates, further correction can't be ruled out. Consequently, a massive rise in oil price which has happened is negative for India."

"For a long-term investor, the current market correction offers a very good opportunity to invest systematically over the next 12 to 18 months as we remain positive on India's long term structural story. We urge investors to adhere to their asset allocation with systematic investing both in equity and debt funds," says Naren.

Among the market segments, Naren believes large-caps seem to be better placed than mid and small-caps. In each of the last six months FPIs have been net sellers of Indian equities and have thus far sold $15.41 billion. This is the longest FPI selling streak since 2008. It is a known fact that FPIs largely invest in large cap/blue chip stocks. So post this, selling large caps seems better placed.

Among the equity segment, investors can consider investing in value-based schemes as over the next 2-3 years there will be opportunities for value investing to do well owing to opportunities due to intermittent market volatility.