iStockFranklin Templeton Mutual Fund believes that it is an opportune time for investors to allocate more money to equity. According to the fund house, investors should top up their SIPs and avoid panic selling.
The fund house points out that the markets appear very attractively poised from a historical perspective. The valuations are almost at their cheapest levels in the last two decades in terms of Price to Book (PB) and Market Cap to GDP ratios. The rolling PE is at 15 the lowest since 2005, the rolling Price to book ratio is 2.05, lowest since 2009, and the marketcap to GDP ratio is at 54, the lowest since 2005.
This is after the risks posed by the COVID-19 pandemic are being priced aggressively across asset classes, including equity. Indian equity markets, as measured by Nifty, have corrected by 29% YTD, and over 30% from the peak achieved on January 13, 2020.
In a note to investors, the fund house says, “Many investors could tend to jump in too quickly. There is no way to call an exact bottom, nor can we tell how far it is. A suitable approach is to layout investments in small parcels over the next, say, two or three quarters.”
According to the fund house, investors could spread their investments into pure multi cap products, large cap funds and index funds. Investors should also keep in mind their asset allocation which reflects their risk-taking ability as an investor. While putting in money keep in mind the medium-term needs for cash,regular income needs and other assets in the portfolio, the fund house said.
The fund house believes that the ongoing phase is a good opportunity for rupee cost averaging, which is the very point of a SIP. It says panic selling in the current environment can cause considerable harm to the long-term return potential of portfolios and investors should avoid that. "Investors could end up selling at throwaway prices what was accumulated through a long accumulation journey," said the fund house.
The fund house points out that the markets appear very attractively poised from a historical perspective. The valuations are almost at their cheapest levels in the last two decades in terms of Price to Book (PB) and Market Cap to GDP ratios. The rolling PE is at 15 the lowest since 2005, the rolling Price to book ratio is 2.05, lowest since 2009, and the marketcap to GDP ratio is at 54, the lowest since 2005.
This is after the risks posed by the COVID-19 pandemic are being priced aggressively across asset classes, including equity. Indian equity markets, as measured by Nifty, have corrected by 29% YTD, and over 30% from the peak achieved on January 13, 2020.
In a note to investors, the fund house says, “Many investors could tend to jump in too quickly. There is no way to call an exact bottom, nor can we tell how far it is. A suitable approach is to layout investments in small parcels over the next, say, two or three quarters.”
According to the fund house, investors could spread their investments into pure multi cap products, large cap funds and index funds. Investors should also keep in mind their asset allocation which reflects their risk-taking ability as an investor. While putting in money keep in mind the medium-term needs for cash,regular income needs and other assets in the portfolio, the fund house said.
The fund house believes that the ongoing phase is a good opportunity for rupee cost averaging, which is the very point of a SIP. It says panic selling in the current environment can cause considerable harm to the long-term return potential of portfolios and investors should avoid that. "Investors could end up selling at throwaway prices what was accumulated through a long accumulation journey," said the fund house.
Get Unlimited Access to The Economic Times
