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Portfolio Talk

Published on: March 8, 2021, 8:22 a.m.
‘Build an ark, before predicting rain’
  • Kothari: if your portfolio is tilted towards equity due to a rise in the equity market, shift from equity to another asset class and vice-versa

By Lancelot Joseph. Executive Editor, Business India

Generally, people plan their tax-saving activities around January-March. How should investors go about in choosing ELSS schemes managed by different mutual funds?

As the financial year end approaches, people start looking for tax-saving instruments. ELSS is one of the preferred options, as it has a lock-in period of three years. One should look for funds which have portfolios spread across all market caps – large, middle and small – across all sectors. Also, look at the fund manager’s track record and select schemes that are consistent in performance.

Markets having soared to record levels, how should investors manage their portfolios during these volatile times?

Index at 50000 is just a number; 15 years back, it was 20000 and, about 30 years back, it was 1,000. So, don’t look at the headline numbers. Market volatility is inevitable. While trying to time the market is difficult, one can look at some basis valuation parameters of the index, such as current and future price-to-earnings ratio, book value, market cap-to-GDP, etc. And, if valuations are above the historical average, one should reduce equity allocation and increase it only when valuation goes below the average. Most importantly, check your asset allocation and rebalance your portfolio across asset classes. For example, if your portfolio is tilted towards equity due to a rise in the equity market, shift from equity to another asset class and vice-versa.

Which are the sectors you think should be the areas of focus in the short and medium term from an investor perspective?

Due to the government’s clear emphasis on privatisation, PSU funds look attractive from the valuation point of view, considering that they have not moved for many years. Also, if the government changes its mindset from divestment to strategic sales, the whole segment of this industry can get re-rated. This is for someone who would like to take some more risk, as it’s a sector call and it may take time to pan out.

Rather than selecting any particular sector, if we look at funds on the basis of value- or growth-orientation, I see a big divergence in the prices of stocks or NAV of funds. Divergence has gone almost to an all-time high level and people are acting as if some growth-oriented stocks have infinite growth and some value-oriented stocks will never grow. I would suggest that they invest in value-oriented mutual funds. 

  • Due to the government’s clear emphasis on privatisation, PSU funds look attractive from the valuation point of view, considering that they have not moved for many years

What is your advice to retail investors for the near future?

Invest regularly – in good and bad times. Continue your SIP, as it helps you to save and create wealth over long periods of time. Rebalance your portfolio and bring it back to the asset allocation, as decided when you initially started your investment planning and which you are comfortable staying on. Maintain a diversified portfolio, diversify across asset classes, across themes, across sectors and even across countries. Look at opportunities or that segment of the market outside India, where Indian companies don’t have a presence.

Actively rebalance your portfolios or pick a product that does it for you. If the market gives you opportunities due to some external events, ensure adding equity to your portfolio, as the Indian economy is set for a structural growth trajectory. Consult your financial professional to keep a tap on your portfolio.

It’s time to follow Noah’s Rule: predicting rain doesn’t count, building an ark does.

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