INSUBCONTINENT EXCLUSIVE:
patience, market pundits are seeking to look at the situation as a glass half-filled, pointing out opportunities to accumulate shares of
good businesses.
They say the way SIP investors of mutual funds are going whole hog to lap up the dips in the market, direct equity
investors too can use the systematic equity planning route to hoard fundamentally-strong stocks, one lot at a time.
While mutual funds are
conviction ideas, systematic equity planning (SEP) or SIPs in direct equities can help.
In a tumultuous market, which itself looks unsure of
its direction in the near term, such a systematic approach can help accumulate stocks at lower prices by averaging out costs.
Direct equity
SIP can help eliminate the risk of timing the market and average out benefits
Investors can put in a pre-decided amount or pick a specified quantity of stocks at regular intervals over long period
If the investment is constant, one buys more units when the price is low and fewer units when the price is high
Similarly, when one buys a specific quantity at regular intervals, it may lower the cost by averaging it out.
The only flaw, if any, is that
direct SIP does not allow automatic diversification the way a mutual fund SIP does, unless the investor himself/herself picks a set of
diverse stocks to buy in the first place.
Direct SIP in equities can help accumulate stocks of your choice in your portfolio on a regular
5Paisa.com said the process works just like mutual fund SIPs, but a long-term approach is needed to see significant gains.
Stock selection
is important for SIP in direct equity
Similar to mutual fund SIP, direct equity SIPs also allow investors to put in money on a monthly or quarterly basis
Time frame and costMarket experts say investors opting for this route must have a clear view about the company and its stock price for 2-3
changes.
Direct equity SIP allows you to save on expenses that you incur in a mutual fund SIP
In mutual fund SIP, the fund manager may have an edge and better ability to switch funds to better stocks, book profits when required or
shift fund to the safety of debt when the situation goes out of hand
In direct equity SIP, one has to do it all by himself, brokerage Bonanza Portfolio said in a note.
Goldi Jain, AVP for Advisory, Sharekhan
said the cost is low in direct equity SIP compared with a mutual fund SIP, where the expense ratio ranges from 1.2 to 2.5 per cent.
Current
market scenarioInvestors have been cautious on the domestic equity market this calendar amid rising crude oil prices, unabated outflow of
The domestic equity benchmarks are trading at around 8 per cent premium to its 10-year average P/E ratio
However, a faster pace of economic growth and commodity prices can be favourable tailwinds for corporate earnings growth
In FY19, corporate earnings are projected to grow at 20 per cent after many years of single-digit growth
However, the equity market has already factored in the earnings recovery in prices
That may mean downward pressure on the market in the near term, said Abhimanyu Sofat, VP- Research, IIFL.
Investment optionsConsidering the
scenario, if you are looking for systematic investment in direct equity with a 2-3 year investment horizon, Bonanza Portfolio recommends a
basket of 8-10 stocks, which include Bajaj finance, Godrej Consumer, HUL, Titan, LT, Maruti Suzuki, Kotak Mahindra Bank and HDFC Bank
5Paisa.com recommends direct equity SIP in Tata Motors, HDFC, IndusInd Bank, Sun Pharma and Lupin.
Jain of Sharekhan prefers HDFC Bank,
Kotak Mahindra Bank, Maruti Suzuki, Marico, Ultratech Cement, Britannia for direct SIP
Investors need to do due diligence while choosing stocks
Also, one would need to review the portfolio from time to time.
