Indian markets have seen both time and price correction over the last one-and-a-half years. Currently, the trailing Nifty price to earnings is around its long-term average. Similarly, India’s premium to emerging markets and Asian peers has also cooled off. Given the robust corporate earnings outlook and stable macros, Chintan Haria, Head, Investment Strategy at ICICI Prudential AMC, said he believes India today is reasonably valued.
However, investors remain sceptical about taking exposure to equities because of geopolitical crises. So, what could be the right way to do so?
Investors who are averse to volatility, Haria said, should consider offerings which have a multi-asset approach.
"By having a diversified exposure across multiple asset classes, one can ensure that the portfolio is not adversely impacted in case of a negative development in any of the asset classes. Here, one can opt for actively or passively managed multi-asset offerings through which an investor can get exposure to multiple asset classes like equity, debt and commodities," Haria told CNBC-TV18.com.
While taking this approach, Haria said investors can choose passive multi asset category that allows for active allotment to assets, which may be ideal in volatile times.
To understand, let's take an example of ICICI Prudential Passive Multi-Asset Fund of Funds. Here, the allocation to various asset classes is actively managed based on the changing market environment. The allocation to various asset classes is tweaked through the holdings in index funds/ETFs of Indian equity, debt and gold ETFs.
"As a result, even though the portfolio consists solely of passive offerings, their allocation remains actively managed. This approach aids in making the most out of volatile times and over the long-term has the potential to generate superior risk-adjusted returns," Haria said.
In multi-asset category, allocation between equity and debt is based on many factors including an in-house equity and debt valuation model.
"The debt investment universe consists of debt (ETFs/Index) funds which are duration-based and strategy-based. Gilt ETFs with varied maturity, target maturity products investing in SDL, PSUs, G-Sec and liquid category offerings are the instruments which will be a part of the debt allocation," Haria said.
Despite the recent changes in the debt space, he believes that debt remains an important asset class in terms of asset allocation.
