The Hindu Business Line : Stay invested for decent lengths of time

TALK to fund managers or check out their views in the media and you will know for sure that many of them are cagey about the prospects of the equity market in the near term. Are the reasons for their apprehension quite real? Or are they based on gut feelings alone? Let us look at some of the recent trends and draw our own conclusions.

There is by now ample evidence to suggest that domestic investors too are a big force in this market. A large section of them has been quite active lately, their operations prompted by the robust figures that corporates have thrown up.

It is generally believed that a resumption of FII inflows (added to institutional support from within) will help the Indian market to do better than it already has.

Petro prices, however, may well be the party pooper and fund houses know only too well that their investors will suffer if the oil scenario turns tricky. Despite such factors as oil, people generally believe that stocks will perform well over time, especially so if seen against the performance delivered by other asset classes.

It is true that the investor fraternity can face some near-term problems. What happens if the monsoon does not turn out to be a decent one? Spare a moment to think about its impact on agriculture and the sectors that depend on the prospects of the rural economy. The picture, you will agree, is not quite pretty.

The equity market, which stands at an all-time high level, has already helped astute investors rake in considerable returns. Whether the recent peak will be crossed after a temporary consolidation is not for us to talk about here but it can be safely stated that fund managers remain hopeful. All said and done, they agree that investors should be ready to stay invested for decent lengths of time without being bothered too much by short-term fluctuations.

On the debt side, there are not too many positive developments to talk about right now. The market is generally tired of debt funds and the pedestrian returns that so many of them have been generating lately. A large number of investors seem to be currently using these funds for temporary asset allocation purposes.

Others are considering them as mere short-term options, to be discarded when monies have to move into more lucrative avenues. Fund managers are broadly advising investors to stay parked in liquid and other short-term schemes, at least till the time some clarity emerges.

Meanwhile, fund houses carry on with their relentless hunt for more assets. The result: A new scheme is being mooted every other day. The latest to do so is Reliance Mutual Fund, which has come out with an arbitrage-oriented product. The latter is an open-ended scheme that will invest in a combination of equity, derivatives, debt and money market instruments, all under three different plans.

On another front, Standard Chartered MF is going around the country, organising road shows for its maiden equity product. It would be interesting to see how much it manages to collect. This is, after all, the first equity product from a fund house that has always distanced itself from equities.

Feedback may be sent to nilanjan@thehindu.co.in

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