Mutual fund investors are in a quandary over whether to raise their Systematic Investment Plan (SIP) allocations or wait more amid the market sell-off. Indian shares have corrected over 3% in the last two sessions, receding from their recent highs.
The sharp decline in benchmark indices can be attributed to various factors, including HDFC Bank's December quarter results failing to cheer the Street, a subdued global environment, and the impact of five-week high US Treasury yields.
Experts see the current fall in the stock markets as a good opportunity to pick blue-chips for
long-term wealth creation. They also caution investors to not fall into the trap of pump-and-dump penny stocks.
Maintaining a long-term view amid short-term noise
Mukesh Kochar, National Head of Wealth at AUM Capital, advises investors to maintain a long-term perspective and ignore short-term market noise.
"The only thing that is important is to maintain proper asset allocation and avoid penny stock ideas. The idea of making quick money should be avoided," he emphasised.
Penny stocks are low-priced stocks that typically have a small market capitalisation and are considered highly speculative.
Benefits of SIPs in a falling market
Nitin Shahi, Executive Director at Findoc, suggests that increasing SIP investments during market falls could be a healthy strategy.
SIPs enable individuals to keep pace with inflation and maintain their purchasing power.
Rupee cost averaging comes into play, lowering the average cost and fetching more units with the same investment amount. This averaging-down strategy can result in better returns when the markets recover.
Shahi also highlighted the role of diversification in reducing risks in highly volatile markets.
Divam Sharma, Founder and Fund Manager at Green Portfolio sees the current
market fall as a short-term opportunity for investors.
He believes 2024 will provide more periods of volatility, offering investors opportunities for long-term wealth creation.
"Investors can increase SIPs over the coming days," Sharma told CNBC-TV18.com.
Aditya Gaggar, Director of Progressive Shares, noted that the ongoing market correction provides an excellent opportunity for investors to add good-quality stocks.
He acknowledged the sharp correction in almost all sectors and anticipated further opportunities for investors.
SIP versus lumpsum: A strategic approach
As the debate continues between SIPs and lump-sum investments, experts weigh in on the benefits of SIPs.
Mukesh Kochar of AUM Capital highlighted the consistent upward journey of
SIPs throughout 2023, with numbers surpassing 17,600 crore by the end of December.
Concurrently, substantial lump-sum investments gained traction, particularly when the market was rising."That rally was broad-based one and in such a type of conviction rally, people tend to invest as fast as possible as the market is continuously on an upward journey and no one wants to do a higher average. However, retail investors tend to favor SIPs for their steady and synchronised approach to wealth creation," Kochar said.
First Published: Jan 18, 2024 3:49 PM IST
