DSP Asset Managers has cautioned investors on high equity market valuation amid plateauing top-line of corporates and advised investors to adopt multi-asset strategy to ride through the bullish sentiment in the markets.

Investors should use the systematic investment plan mode for disciplined investment in equity with long term vision and should not rejig their investments based on past performance of schemes.

Emerging concerns

Despite the overall resilience in high-frequency growth data linked to domestic demand, two areas of concern have emerged recently, it said. The vulnerability of rural demand within the broader consumption landscape and uncertainties surrounding the outlook for private capital expenditure amid the overall investment scenario, said the fund house in its annual review.

Given the broad-based economic recovery, the Indian mid and small-cap segments witnessed a notable surge of over 40 per cent and public sector enterprises bounced back last year. These developments have piqued the interest of investors, prompting questions about the factors propelling this run-up and future of these segments.

The BSE PSU index has delivered a compounded annual growth rate of 28 per cent over last five years and has risen by about 60 per cent last year. In comparison, the Nifty-50 index posted a CAGR of 17 per cent and 20 per cent in the similar period.

‘Remain vigilant’

Vinit Sambre, Head-Equities, DSP Mutual Fund said despite the slowdown in revenue, the bottomline of corporates are improving because of the drop in input cost and improved operational efficiency. However, he noted that this may not last long as crude prices have already started inching up and other raw materials are also strengthening.

Given the recent trend, the retail consumption is also slowing down in the rural areas and may have an impact on corporates capex plans going ahead, he said.

While India does offer an exceptional long-term investment opportunity, he said investors should remain vigilant considering a shifting landscape marked by decelerating global growth, rising global interest rates, persistent near-term dollar strength and heightened geopolitical uncertainties.

While India, with its primarily domestically driven growth, is expected to be relatively less susceptible to global macro risks, expectations need to be appropriately set for the current year on back of rich valuations, he said.

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