The markets have been falling since the second wave of COVID-19 hit the country and investors are now looking for safer bets. In an exclusive interview with Money9, Sunil Subramaniam, MD and CEO of Sundaram Mutual Funds, explains what strategy a mutual fund investor should follow when the market is volatile. Edited excerpts:
How will stock market investors deal with Covid-19 crisis?
Following last year’s market crash, investors are now treading with caution. It may be recalled, after last year’s fall, Sensex recovered quickly and investors who stayed put made huge gains. After every 10-15 years, markets go through a covid-like crisis, which triggers a ‘nervous reaction’. However, it also opens window for long-term investors.
It is not recommended to redeem your investments amid volatility. The market dynamics change quickly. Well-performing companies may get affected due to the fall in the broader market. But once the crisis is over and the markets recover, these companies take a big leap. The investments you make today, have a better chance of reaping higher returns tomorrow.
I also believe that the investors will not pull out their money during the second wave of covid-19 infections. Many investors who withdrew their investments last year, regretted it later. Investors are hopeful that the market sentiment will pick up within a couple of months.
Which sectors will show major growth?
The investors should focus on the economy. The positive GDP numbers from the last quarter will definitely benefit the companies. Investors may focus on household and consumption sectors. The shares of the FMCG companies may hit new highs.
Besides, banking sector has also seen a positive movement. During the last year, banks offered loans at rates better than ever. Investing in banking and financial sector could yield better returns, since lenders are likely to show an improvement in their net interest margins and provide good returns in the coming two years.
Infrastructure sector should be considered for long-term investments. The increase in capital expenditure in the budget 2021, rise in FDI and PLI scheme by government is sure to benefit the infrastructure sector.
What should be the strategy for mutual funds?
It is very important to understand the direction of the market. Last time, foreign institutional investments boosted the share price of big corporates. Due to this, large cap stocks are swaying in the market till now. But, there will be growth in each and every sector as soon as household investors come back into the market. There will be opportunities in the mid-cap and small-cap companies as well with economic recovery. You can also consider including multi-cap or flexi-cap funds in your portfolio this time, depending on your risk appetite.
For the full interview click below
