Benchmark indices might be down nearly 5% from their all-time highs recorded in January but individual portfolios have turned red with most stocks suffering a double-digit declines.
The Sensex and Nifty hit record highs of 36,443 and 11,171, respectively, in January. Both indices are trading with a positive bias on a year-to-date basis, but a sharp fall in broader markets dented investor portfolios.
The BSE Midcap and Smallcap indices slipped 11% each so far in 2018 compared to a 3.7% gain seen in the Sensex. The Nifty rose 1.57% in the same period.
There is no simple way to design a portfolio since it is subjective and varies from person-to-person based on his/her risk profile. An investor should not hesitate to book profits in stocks that have rallied and look to exit companies that are facing pressure.
If you are in the age group of 35-40 years and can take risk, experts said it is time to make some changes. High exposure to mid and smallcaps should be curtailed and investors should stick to stocks that are expected to deliver long term growth.
“Recent correction in small and midcap stocks should not raise alarms for companies having a sustainable business model. We would advise investors to hold such stocks. Gold is an independent investment theme and a certain percentage of the yellow metal is always advised to safeguard the portfolio from stock market volatility,” Jimeet Modi, Founder & CEO, SAMCO Securities, said.
However, he was quick to rule out incremental investment in gold at current levels. “Ideal portfolio mix should be 50 percent in largecaps, 20% in midcaps, 10% in smallcaps, 10% in gold and balance in short-term liquid funds.”
Most investor holdings consist mainly of midcaps, as a result these portfolios may appear to be bleeding in the short term, experts said, adding that those holding for the long term may see positive returns. “The Indian economy is expected to embark on a higher economic growth trajectory owing to proactive measures taken by the government as well as favourable economic conditions expected to prevail during the course of the year. That should put the focus back on mid and smallcaps. Hence, companies which are displaying signs of future growth rate should not be ignored.”
Ritesh Ashar, Chief Strategy Officer at KIFS Trade Capital advises new investors to buy midcaps at current levels and existing investors to accumulate stocks.
“Looking at the current market scenario, midcaps have corrected 20-25% from recent tops. This level looks good as a buying opportunity for new investors. Those investors who are already holding midcaps can add-on to current positions.”
At the current juncture, he finds midcap IT promising. “One can upon stocks like Mindtree, NIIT Technologies, and Persistent Systems.”
On portfolio construction for an average investor in the age group 35-50 years, Ashar said 40% investment can be used for midcaps, 40% for front-liners and the balance in debt market.
Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
First Published: Jun 6, 2018 11:15 AM IST
