Sensex at 60,000: What should be your mutual fund strategy?

This article was originally published on this site

The BSE Sensex scaled the 60,000 on Friday. Naturally, investors are excited as the stock market continues to rally amid uncertainties from the USA and the Chinese market. The rally was seen not only in the bluechip segment but across broader markets. Nifty Smallcap was up 0.84 per cent while Nifty Midcap advanced 0.66 per cent. Broadest index on NSE, Nifty 500, was up 0.60 per cent. Some analysts are also pointing out that the last 10,000 points were crossed in a record time by the Indian stock market.

It took the benchmark BSE-Sensex 160 trading sessions to make the journey from 50,000 points to 60,000 points this year. The broader 50-share NSE Nifty was nearing its own landmark of 18,000 points. Market pundits suggest that diminishing concerns about a possible third wave of the Covid-19 pandemic and a pick up in the pace of vaccination have contributed to the gains in the markets.

Whenever the market touches such milestones, we have seen a lot of new investors look to start investing and many existing ones want to make changes to their portfolios. However, mutual fund advisors take a different route at such times. They believe the milestones in the market shouldn’t decide your strategy.

“We don’t get too excited by these milestones . For us, the milestones in an investor’s personal financial journey are more important. And that’s what they should focus on as well. Having said that, it does re-affirm investors’ conviction in equity investment over long term,” says Subir Jha, Founder, Buckspeak, a financial planning firm, based in Hyderabad.

SR Srinivasan, founder, SriNivish, a financial planning firm, based in Chennai, suggests some do’s and dont’s for mutual fund investors at this point. “Investors should continue with their equity investments as per their plan. If required, do tactical rebalancing from equity to debt. If there is a gap in the emergency corpus, ensure that it is filled. More important, don’t get carried away by FOMO. Don’t assume that this bull market would always continue. Don’t change your return expectations to a higher value. This can impact your financial goals,” says SR Srinivasan.

Another important point that these financial planners raise is that investors tend to get attracted to new funds when the markets are scaling new highs. They believe that investors should be mindful of the number of funds in their portfolio and also only invest in schemes that have proven their track record in different phases of the market.

“Reduce your mid and small cap exposure, if it’s more than your long-term average weightage. This is also a good time to sell some funds if your portfolio has a lot of schemes in it. Don’t fall prey to new funds, most of them are old wine in new a bottle. Trust schemes which have a proven track record and don’t tinker with your SIP strategies a lot, keep them simple,” says Subir Jha.