Investors should not go overboard and must deploy funds in equities only in a phased manner.
M Allirajan, TNN | Sep 3, 2014, 05.12AM IST | Times of India

The equity markets are having a good run after underperforming for more than six years with the sensex crossing the 27,000 mark for the first time and the nifty nearing 8100. Does it call for a substantial increase in exposure to equities? Not really, say experts. Investors should not go overboard and must deploy funds in equities only in a phased manner. Here is a lowdown on the investment strategies for a buoyant market.

Invest, but don’t overdo it

The markets are on a roll with fresh highs being hit almost on a daily basis. With the economy showing signs of a turnaround, crude prices on a decline and inflation softening, equity markets would remain on a strong footing, say observers. “Investors need not be bearish. The economy is doing well and the indicators are positive,” says Anil Rego, CEO, Right Horizons, a wealth management firm.

“Equity markets would do well. Investors should not be under-allocated to equities,” says Rupesh Nagda, head, investment advisory and products, Alchemy Capital Management. But there is a word of caution though. Investors should avoid bulk investments and increase exposure through SIPs (systematic investment plans), say advisers.

Restrict bets on mid-caps

Mid-caps stocks have surged amid hopes of a revival in the investment cycle. The mid and small-cap mutual fund (MF) category has soared 93.4% on an average in the last one year. Several MFs in the category and stocks have more than doubled during the period. But experts say that investors should not be carried away by the euphoria.

“Investors should not get enticed and restrict their investments to mid-caps,” Nagda says. Average investors can limit allocation to mid-caps at 20% of the portfolio as they are extremely volatile, he says.

Fixed income still attractive

Fixed income schemes may have lost their sheen after the strong run by the equity markets in the past few months. But they still offer decent returns as interest rates are at elevated levels, say advisers. “Fixed income is still attractive. Investors would not get these rates after six months,” says Abhinav Angirish, founder, investonline.in, an investment advisory. “One can make decent returns in fixed income in the next 12-15 months,” Nagda says.

Gold not to shine

Equity markets may be on the rise but gold has lost much of its glitter. Gold is the worst performer among widely traded assets and the only one to post a decline in the last one year. The outlook is still not bright for the yellow metal, say experts. “Growth is coming back. So, people are investing in riskier assets. Gold will remain subdued and will not give good returns,” experts say. “Investors can have 5%-8% of their portfolio in gold as a hedge against inflation and adverse global developments,” Angirish says.

Source : http://goo.gl/AVlwSp