Sensex turns YTD flat: Should you top up your mutual funds now?

Indian markets have performed relatively well in the last 2 months despite concerns about aggressive rate hikes by the US Fed, recession in USA and our own domestic challenges. However, on a year to date (YTD) basis, Indian markets (S&P BSE Sensex) has been flat primarily due to the major correction seen during the beginning of this calendar year.

That said, domestic flows remain strong and now foreign institutional investors (FIIs) too have turned positive post the correction in commodities.

So, is it a time to top up your mutual funds?

Commenting on the same, Saurav Basu, Head – Wealth Management, Tata Capital said that a staggered investment approach into equities appears to be a reasonable investment strategy in the current market scenario.

“Valuations of the broader markets have become a lot more reasonable since the recent correction. However, looking at the global macro uncertainty and its potential impact on domestic earnings, it may just be the time to remain staggered,” Basu told CNBC-TV18.com.

A staggered investment is a plan in which you build up through the early years to ensure that when you reach different stages in your life you have collective pools of money waiting for you.

What Basu is trying to say is that investing a large amount in one go may not be wise now. Similarly, adopting a staggered approach would enable you to purchase shares of fundamentally strong companies when valuation becomes attractive.

Tejas Khoday, CEO and co-founder of FYERS also believes that markets may remain volatile in the near term. With the quarterly results around the corner, he is of the view that stocks could fall further if corporate earnings turn out to be disappointing in the end.

However, he thinks that this could be a good opportunity from a medium to long-term perspective to invest in mutual funds through the Systematic Investment Plan (SIP) mechanism, and/or direct equity with a preference for good quality stocks, exhibiting better earnings growth.

Under SIP, a fixed amount will be deducted from a specified savings account every month towards a mutual fund. Also, you will have the option to increase the amount of the instalment by a fixed amount at pre-defined intervals.

Meanwhile, post the FOMC meeting and the third consecutive 75 basis points (bps) US Fed rate hike, a downturn in the global stock markets is on the expected lines.

The prospects of India’s central bank following suit and announcing a 50-bps hike in rates is a certainty, experts say.