June 14, 2024
Choose multi-asset or balanced advantage funds for core allocation: Tata Asset Management CIO-Equities Rahul Singh - Money News

Diversified funds dynamically adjust allocations to capitalise on emerging trends and opportunities. Such funds not only mitigate the risks associated with high valuations in any single sector but also position investors that could benefit from the broader economic growth, Rahul Singh, chief investment officer, Equities, Tata Asset Management, tells Saikat Neogi.

How would you advise investors to chalk out an asset allocation strategy and not attempt to time the market?

One could allocate 40% to balanced advantage or multi-asset funds, 40% to large- and mid-cap funds and value-oriented funds and keep 20% for a mix of small-cap or thematic funds. If you are optimistic about banking, invest in banking and small-cap funds; if healthcare is your pick, then the rest in pharma, healthcare, and small-cap funds. It is important to focus on areas where the economy is thriving. Avoid being overly conservative while keeping an eye on valuations. Make balanced advantage or multi-asset funds your core allocation.

As valuations are elevated, would investing in diversified funds be a better bet for the long term?

With the Indian economy poised for steady growth, driven by strong domestic demand and favourable government policies, diversified funds may capture opportunities across multiple sectors. This approach not only mitigates the risks associated with high valuations in any single sector but also positions investors that could benefit from the broader economic growth. Moreover, diversified funds managed by experienced fund managers may dynamically adjust allocations to capitalise on emerging trends and opportunities.

In the current market environment, will large caps have slightly better risk reward as compared with mid- and small-caps?

From a valuation perspective, large caps may offer better risk-reward at this stage but mid- and small-cap stocks may offer higher growth potential given that the economy is in the midst of an investment cycle recovery. Therefore, one has to take cognizance of individual risk appetite and investment horizon. At this stage it is futile to predict how the market will behave over the next few weeks. For investors seeking a balanced risk-reward profile, large-cap stocks are likely to offer better resilience amidst the current scenario.

What strategy should retail investors take now to beat the stock market volatility?

I believe that the Indian market has inherent strengths that could sustain gains; hence, investors may look beyond immediate triggers or small corrections. Right now people are taking cues from voting percentage and how that may impact the overall tally versus what was predicted before elections.

However, my view is that investors may consider sectors like healthcare and pharma, power and manufacturing / capital goods. We are expecting that investments in these sectors may sustain due to increased government expenditure and continued demand for better healthcare facilities and infrastructure. While we can’t be extra-conservative, at the same time one must keep an eye on valuations. Investors may invest for the long run as a minor correction might happen. But cautious investors with low-risk appetite may avoid taking significant exposure in the market closer to election results.

How should retail investors devise a strategy to capitalise on sectors that have strong earnings recovery?

One could focus on sectors showing better earnings recovery, such as manufacturing/capital goods, pharma & healthcare and banking and financial services. The IT sector too has benefitted from ongoing digital transformation and increased global spending, although the near-term demand uncertainty can weigh on the sector valuations. In large private sector banks, there is valuation comfort and the negatives in terms of margin pressure and/or slower growth seems to have been priced in. Retail investors may consider diversified funds that have significant exposure to these high-growth sectors.

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