What would you do if you are unable to fathom what is going on in the stock market with so many macroeconomic distress at playDo nothing and stay put in the systematic investment plan (SIP) of mutual funds that you may be having.
If you do not have it, go for one, say market veterans.But if somehow had you accidentally drifted into a smallcap fund and that is bleeding now, redeem and go on a holiday.Data shows mutual fund SIPs can hold you in good stead amid such headwinds.
On an average, smallcap, midcap, technology, tax-saving, multicap, infrastructure and FMCG-oriented funds have delivered annualised return of between 16 per cent and 30 per cent over the past five years.For instance, a monthly SIP of Rs 1,000 in Escorts High Yield Equity Fund since May 2015 would have now become Rs 45,513.
Mirae Asset Emerging Bluechip Fund would have turned the same amount into Rs 49,126 at present.
People accumulating savings should just keep calm and carry on.
Do nothing, just carry on with your SIP, advises Dhirendra Kumar, CEO, Value Research, a mutual fund research outfit.SIP is a great vehicle for somebody who can witness and withstand such declines and accumulate at lower levels.You must ensure that you are investing at least for a three- to five-year time horizon and do not look at the NAV on a day-to-day basis, Kumar said.Equity benchmark BSE Sensex plunged over 1 per cent in last three sessions on rising crude oil prices and a falling rupee.
Brent crude surpassed the $80 a barrel mark for the first time since November 2014.Sanjiv Bhasin of IIFL said, Rising crude, bond yield and falling rupee are impacting the market right now.
There is still a lot of value creation waiting to happen in the midcap space.
Investors can focus on this space.The BSE Midcap and Smallcap indices are now 12 per cent and 13 per cent, respectively, away from their all-time high levels touched in January this year, whereas BSE Sensex is just 3.55 per cent shy of its all-time high mark.If you have accidentally drifted into smallcap funds and made money and you are witnessing a decline in the value of your investment, take your money out and go on a holiday, Kumar said.He says investors should not try to time the market and think it has bottomed out and now is a time to invest.
Work on any method, but be a regular investor, he said.Kumar prefers funds such as Principal Emerging Bluechip, SBI Magnum Multicap and LT Midcap.
In the smallcap space, he likes DSP BlackRock Small Cap Fund, Reliance Small Cap and SBI Small Cap Fund.Multiple ratio breakdowns make this market a minefield23 May, 2018Ratio breakdowns have a lot of relevance.
In the past, such breakdowns in Metals-to-Nifty ratio in 2014, Pharma-to-Nifty ratio in 2016, Auto-to-Nifty ratio in 2014 and now the IT-to-Nifty ratio -- all of them have transformed into medium-term trends.
Elara Capital looks at more such breakdowns to tell you where to go and where no to.BSE Midcap-to-Nifty ratio: Breaks four years of uptrend23 May, 2018Post 2014, midcap-to-Nifty ratio broke out of a decade cycle downtrend on the back of midcap chasing.
The ratio has been following this uptrend for the past four years.
We saw two large setbacks in midcaps over 2016-17, but this trendline has held well.NSE Midcap-to-Nifty ratio: Breaking key trendline23 May, 2018Since 2014, midcaps have seen three large round of corrections during January 2016, November 2016 and May 2017).
In all three rounds, the retracement in Midcap-to-Nifty ratio from the highs in the range of 6-8%.
However, in this round, midcaps have already retraced 14 per cent from top, puncturing the Bull cycle.BSE Smallcap-to-Nifty ratio: 4 years uptrend cracked23 May, 20182014-15 was a largecap market, 2015-16 was a midcap market and 2016-17 was smallcap market.
This breakdown holds importance as we had seen big crowding in the side markets in 2017 post demonetization.NSE Smallcap-to-Nifty ratio: Breaks down23 May, 2018One full cycle of shift into smaller names seems to have been played by the markets for now