The Nifty 50 index is down 16% from its peak post Friday’s steep sell-off. The broader markets have had it worse with the Midcap index declining over 22%, and the Smallcap index having shed over 25% from its peak in December last year. That would have made a serious dent to portfolios of investors.
The conviction of the most serious investors could get tested during the market fall. That is evident from the number of SIP cancellations as well. But what should investors do during a fall like this? How should portfolios be positioned? While there is no concrete answer to this question, experts have shared words of wisdom as they have been through multiple such cycles.
In an interaction with CNBC-TV18 on Friday, Mihir Vora of Trust Mutual Fund shared some insights on what investors should be doing in a market fall.
“First of all, ensure that your original thesis is solid and stick to that thesis in terms of asset allocation. For traders, it is tough, but as an investor, as long as you are convinced about the original thesis of asset allocation, I would stick to it,” Vora said.
Vora also spoke about risk control as certain asset classes have certain restrictions and the portfolio needs to be positioned accordingly. That needs to be maintained as well.
“And don’t get swayed by volatility. Sometimes people use volatility as an excuse to change the broad thesis, which should not be the case as volatility was anyway part of the original assumption. So, I would stick to discipline,” Vora said, adding that if India is assumed to grow at 6.5% next year, then a lot of negatives and earnings downgrades are in the price, particularly the benchmark indices. For the broader markets too, all of that, to a great extent, is in the price.
With a fall like this, are there pockets of opportunity?
Vora mentioned that there are pockets of opportunity. “We do not keep too much, somewhere between 5% to 10% but not beyond that unless there is a doomsday kind of a view, which we do not have at this point,” Vora said, suggesting that such a fall should also be used to finetune an individual’s portfolio.
“If stocks have fallen by 50%, they become cheaper by that much. So you can use the opportunity both ways. First, you can buy the same stocks at cheaper prices but also decide on strategic spring cleaning, analysing whether some of the leaders of the last rally will continue to reduce.”
PSUs as a basket has also seen a steep correction. The Nifty PSE index has shed ₹25 lakh crore in market value since it made its peak on August 1 last year. Most of these stocks have corrected between 20% to 60% from their respective highs, be it defence stocks, railway stocks or even shipbuilders.
“As of now, in the portfolio, we only have exposure to some of the defence names and we are sticking to that. We don’t have any of the PSU names or PSU banks, except for one,” Vora told CNBC-TV18. Beyond the PSUs, Vora wants to bet on banks and NBFCs as two years of underperformance makes a case to get bullish on them in terms of valuations as well as growth potential.
Of course, despite such a fall, there will be pockets that investors and fund managers would want to stay away from. Vora is underweight on FMCG, utilities, global commodities, and metals. “We are looking at earnings growth and earnings visibility because by nature we are growth investors. These segments, we feel, are more cyclical or low growth in nature,” he added.
