What should be your move in current market scenario ?



If you are an investor or someone who is looking to invest in the Indian economy, you must be aware that while the debt market is facing turbulence due to the recent downgrades in the securities of some of the giant companies like "Yes bank", ADAG, DHFL group and even Zee group. At the same time, the equity market is rushing to the sky and is rolling around its all-time high.

In this article, we will be discussing what should be your strategy in such a cumbersome economy. While moving forward we will also be looking into the future outlook of the markets. In this article, our primary focus will be on retail and small investors only, as the institutional investors or the big players might already have planned their next move. But these small investors are at the end of the knowledge tail and need some updating.

To begin with, let's look at the positive and simpler part of the market i.e equities. The same equity market that has bled red during the last year is on a skyrocket currently. The movements carried on by the Indian equity market during the last six-eight months is really high. NIfty has been at a level as low as 10,448 to as high as 12,000 in just last 5 months. This heavy movement in the market is due to many combine forces and reasons. Be it general elections, crude oil prices, US-China trade war which is getting more heated up with time or the economic cycle of the US economy at large, all these factors have led the Indian markets to move to such diversified tangents.

For the first time, the Indian economy has been counter-cyclic to the US economy. This has made a lot of FIIs to invest in the Indian markets.

On the hand, the debt markets have been in a bit of the trouble due to downgrades and defaults of some of the major players in the economy. The liquidity of the NBFCs has been a point of debate since quite a long time now for the institutional investors. At the same time, the retail investors and small investors are worried about the performance of their debt mutual funds.

So if, the markets seem to be in such extreme positions, what should be your action plan now? 

Equity Investors: 

 For those who are into direct equities and have some investments made 4-5  years back, it is the right time to book your profits and rebalance your portfolio. Those who are holding a share for more than a five year, be patient let the power of compounding do its magic as your purchase should have stabilized by now. But those who are planning to enter the market go on as there isn't any right time to enter the stocks but do your homework properly as most of the companies are highly valued right now.

Those who are planning to enter the market through mutual funds, it is recommended to go through the SIP method rather than putting the entire chunk in one shot. As these SIPs will help you average out your higher purchasing cost over the long term.

Debt Investors: 

  Firstly, for those who are already heaving debt funds in their portfolio, don't make the mistake of panic selling. Sit down relax and analyze your fund, look into the portfolio of the fund and check out its paper holdings. If you find any suspicious or doubtful security in the fund's holding, check its weightage and check its maturity then take any action.

Those, looking to park their money into debt funds for the time being it is advisable to go for the funds with a short average maturity of paper holding. Remember, there is nothing like risk- free investments in mutual funds. Though there may be some low-risk categories but even they are also not risk-free. Also, don't just look for the risk in isolation, always consider the returns associated with that risk. Consider the risk-return profile of the fund and then based on your tolerance select the fund. So, opt for the risky debt funds such as credit risk only if you are, well consented with the risk-return profile associated with the fund.

Also as per the new guidelines of the SEBI, fund houses have to mark to market there underline securities which are having a maturity of beyond 30 days. This will make the net asset value of debt funds more realistic and suitable for analyzing.

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