What an Investor should be doing in Present Market Situation

What an Investor should be doing in Present Market Situation

We are seeing a situation where rupee just becoming weaker and weaker vis a vis dollar, stock market which was moving northward some day back now going south ward , GDP growth has been also showing downward trend last some quarters , interest rate movement depending on lots of economic factors dominant one being inflation etc . If anyone asks me what do I foresee from here in terms of investment and return I am at sea to reply to this . It is not because of real economic and financial factors but things that are influencing these factors are not clear and more of confusion . If some expert giving a sure shot reply it is either coming from his optimism or pessimism or but is it from fair analysis of facts ? .

Being an investment advisor I feel my responsibility is more toward guiding investors on investment front with sincere intent. Firstly I  believe before advising any client the advisor should ask or judge himself – does he know everything to guide his clients about investment properly . Do we know what will be next move of Govt or corporate decision makers ?  Do we know what will be the thinking of FIIs today in terms of their investment in India or else where ? Do we really know what policies of Govt will see its light or get implemented and by when ? . To most answer is not clear .

Well the realty is most of us just read or gather information from secondary sources i.e TV, Newspaper , websites , research report and form an opinion . Is the information moving in cyclical way amongst these sources and so one influencing the other or there is really primary sources of information. Very difficult to comment on this . My take on this is today most of these secondary information are short lived and following day to day news and views . The news and views to a large extent are not fundamental to the assets where investment goes but more with perception of different stakeholders in the financial world on various non economic , non financial factors more than  economic , financial factors and that is what leading to more confusion than clarity about road ahead .

Globally also when most economies are facing some or the other problems in their own backyard the various permutation and combination of decision making also is more non clear than clear . So that’s why my first query to any expert is how much they know or how much they are sure about how different financial and investment assets will perform so as to give correct investment advice to the clients .

I feel when so much of uncertainty , non clarity then the best thing is to play safe first . When I am saying safe I mean protect from downside return in short to mid time span  . Lets look all assets today . Gold seems riskiest in short term so should be avoided . The only way I feel Gold should be apart of someone portfolio is one from future family need aspect i.e for marriage in family . Else can be just 5% of overall investment portfolio more to act as hedge against uncertainties , inflation. But at this point of time fresh investment decision in Gold can be withheld for some time at least .

Real Estate is still appreciating but again in what form , land or constructed one . Land is limited so will always grow in value but location is very important and risk from getting grabbed by antisocial elements do carry headache . Flat or house is good option but one has to look at volume of money required and again go for location where there is cent percent more scope of growth in value.

Coming to debt and equity there is no doubt that debt was and is safer bet in short term . Equity seems very risky in short term. One can dabble in stock market and can still make money if luck is on his side but definitely not seems the case as far as equity mutual fund is concerned in short term . One has seen by experience that when short term return is very shaky and risky , confidence does not come for long term return even when fundamentals of the corporate are good . Looking at the scenario today can we say that fundamentals of corporate are looking good today . An optimist will say yes and in fact that is what should be but in reality is it really so ? What decides about fundamentals – management , consumer , competition , economy , performance etc . Is the confidence level of all very high ? . Ideally Equity is the best bet in long term and I firmly belief that it is even looking at present dampening situation today . But if I have to advise anyone on equity mf I will tell to be cautious in selecting here also . Most important is conviction about this asset and firm determination to stay invested in this asset for long . Interest in equity comes from the assessment of future earning from the business and if there is element of unpredictability in earning of corporate in short term there creates interest or lack of interest in equity . One major problem the equity mutual fund is facing is that since huge money came in short span of time when the market shot from 15000 level to 21000 level ( sensex ) , every rise in market level is now taken more to recover the losses existing in the portfolio last 4-5 years and so with more units exiting at higher level and net sales being negative , when market goes down due to FIIs action / inaction or due to some other issues the NAV goes down and starts looking unattractive and not the case of bouncing back . It is a situation where an investor the moment he starts observing upward movement in market levels and just under some serious introspection there comes the fall and the confidence which was just starting to build up breaks even more fiercely than the fragile built up .

So the moot point for investment in risky asset ( equity mf ) is conviction of investor about the asset performance , conviction that corporate are seriously involved in growing their business and  government is serious about creating positive investment climate . If devoid of any such conviction inflow in equity asset will be short lived and opportunistic only .

If conviction exists the investor should focus on those stocks or companies who have done well in all market condition and have long term investment horizon ( at least 3 to 5 years ) . Funds dominated by large cap in FMCG, Pharma looks attractive and so do new sectors like educations . But most important is the fund manager track record and his ability to withstand well in downward market trend .  One last advice to investor , don’t believe blindly on secondary source of information , do some study and fair analysis yourself also and then take investment judgment , after all its your hard earned money .