26/07/2018
Dear Valued Investor,
For the past few weeks we are witnessing two contradictory trends in equity markets. While major Indices (Sensex/Nifty) have formed new highs, most of the equity MFs are yet to catch up with 31st Jan 2018 NAVs which is the reference point for newly defined capital gain rules.
It may be noted that most of the Mutual Fund schemes have been able to outperform Sensex and NIFTY by a decent and noticeable margin in 3-5-7 years period. The same has been possible due to inclusion of stocks which are not only part of Sensex or NIFTY but beyond that from Mid Cap and Small Cap universe. At times the trend may be noted that even without Sensex/Nifty moving upwards significantly, MF Schemes exhibit northward movement.
In last few months both Mid Cap and Small Cap have undergone a significant correction due to various reasons which may include but not limited to valuation, change in stance in interest rate by RBI, inflationary challenges post high crude oil prices and somewhat tightening global liquidity and temporary squeeze of easy money.
While above may be some of the fundamental reasons, after deep correction in select pockets, valuation excesses may have been addressed to large extent. Equity as a growth asset class is capable of and has demonstrated mid to high double digit returns in longer holding periods of 5 years and beyond, short term volatility can, at times, unnerve some of the amateur or non advised investors. This is to reaffirm the faith in long term growth possibilities of effectively managed portfolio. We at AU Mutuals remain committed as always to align and realign the portfolio of every single investor without any prejudices. While the objective of every single person has to be growth undeniably, the portfolio construction will most obviously differ from one person or family to another depending on very basic variables like years to goal, response to volatility, liquidity requirements and cash flow projections.
SIP Investing: While SIPs are gaining prominence and gradually becoming a household name with wide acceptance, 4-6 months’ down cycle of equity markets may compel to think of its attractiveness to those beginners who may have got enthused by immediate past returns also referred to as recency bias. While the fact remains that SIPs are advantageous due to the very volatile nature of equity markets. A long volatile market followed by a stable one after 5-7 years would mean optimal utilization of rupee cost averaging. The volatility has been the key reason for enormous wealth creation through SIPs in last many years.
We continue to believe that our economy with continue to grow at healthy pace notwithstanding the spells of tepid growth followed by exuberance and high growth trajectory. As investors it helps to remain calm and confident to realize true potential of investing.
Happy Investing
AU Mutuals Financial Planners Pvt Ltd
