Post the elections, Indian equity markets touched an all-time high at the beginning of June.
However, after the announcement of the Union Budget for FY19-20,
- the large-cap Nifty index is down 10%,
- while the midcap and smallcap indices are down 13-16%.
What’s driving the markets down?
- There are growing concerns regarding a slowdown in consumption, especially in the Auto sector.
- Contrary to market expectations the Union Budget did not provide a booster dose for the already slowing Economy especially after the IL&FS crisis.
- We have seen sizeable FPI outflows in July due to an increase in the tax surcharge for some of the FPIs which has impacted sentiment.
- Global risk-off due to re-emergence of trade-war is further affecting the currency market and equity markets
What should you do?
The best investments often are made in times of fear and depression. We remain constructive on the Indian equity market outlook from medium to long term. We recommend the below investment strategy for your clients –
For existing investors –
- Continue your SIPs in equity mutual funds. Investing via SIPs during this time helps you buy more units.
- Maintain proper diversification across asset classes
For new investors –
- Gradually start building your exposure in equity vis SIPs in equity mutual funds. Now is a very good time to start investing or increase your allocation in equity.
- If you’re looking to invest a lump sum amount, stagger it over the next 12 months and invest via SIP rather than investing a large portion at once. As per the current scenario, markets are expected to be volatile for the next 1 year, and you can gain from the coming volatility.