'If equity is ‘Singham', fixed income is ‘Chhaava': Veteran fund manager on long-term wealth building, risk & more

As the Reserve Bank of India announces its latest policy decision—one that has sent ripples through the financial markets—what should investors, especially those in mutual funds, do next? In a conversation with Zee Business Managing Editor Anil Singhvi, market expert Lakshmi Iyer shared valuable strategies and ideas for long-term investors looking to invest in mutual funds.

Lakshmi Iyer of Kotak Mahindra AMC has called the current market moment a “bazooka moment.”

According to Iyer the RBI’s move to front-load rate cuts as a significant positive for the markets. While the central bank’s stance suggests a pause in further cuts, the door isn’t completely shut. “The weather is pleasant, but the path is uncertain,” she added.

Is there any threat form global markets after RBI's policy decision?

Globally things still seem fluid and the Nifty 50 has rallied about 13–14 per cent from the bottom, she said.

For further growth, earnings and capex growth are essential and a report suggests capex could double in the next five years.

We are close to all-time highs, just 1,000 points away. But since many positives are already priced in, the market may move sideways for a while. Slow growth is actually good—it gives everyone a chance to participate.

Globally things still seem fluid and the Nifty 50 has rallied about 13–14 per cent from the bottom, she said. Despite global uncertainties, India’s fundamentals remain strong and Nifty 50 has rallied 13–14 per cent from its recent lows, and with capex expected to double in the next five years.

“Slow growth is actually good—it gives everyone a chance to participate,” Lakshmi noted.

What if you missed the market's recent rally, is it good time to invest?

For investors who missed the rally from 22,000 to 25,000, she advises not to wait for a perfect entry. 

“If everyone waits for the market to fall, they might miss out,” she said. Iyer has recommended to follow 'invest on dips', whether through mutual funds, stocks, or index funds.

Where should you invest: Multi-cap, flexi-cap, mid-cap, or small-cap funds?

In terms of selection funds, flexi-cap funds are good, but multi-cap is her favorite because it has regulatory allocation across large, mid, and small caps.

"Midcap index has performed well recently. Nifty is at its 5-year average valuation (20x), while midcaps are trading at a 10 per cent premium," according to her. 

"Selective stock picking in mid-market segments is advisable. Going forward, sector-specific and stock-specific strategies will work better than broad index investing," she said.

Which sector should investors pick in current market?

With falling interest rates, Lakshmi is bullish on the banking and financial services sector (BFSI), particularly in private banks and NBFCs.

A 100 basis point CRR cut effective from September is expected to boost liquidity. Real estate also looks attractive selectively, while IT requires careful stock selection, says Lakshmi

"IT has shown a bounce, but stock selection is key there. Real estate also looks good selectively," she added.

Other than equities, which asset classes should investors focus on? 

To explained Lakshmi compare equities and fixed income with Bollywood movies like 'Singham' and 'Chhaava'.

“If equity is ‘Singham,’ then fixed income is ‘Chhaava,’” said Iyer, stating that both asset classes play vital roles in long-term wealth creation. 

Bond funds are expected to continue to benefit over the next 12-18 months, though the impact of the change in policy stance can be seen in the short term, she said.

She also noted that precious metals continue to show strength, advising investors to allocate about 10 per cent of their portfolio to gold and silver.

(Disclaimer: The views/suggestions/recommendations expressed here in this article are solely by investment experts. Zee Business suggests its readers consult their investment advisers before making any financial decision.)