One month back, things were decidedly looking good for the Indian markets. The domestic political scenario seemed to have stabilised with BJP win in Assam, the losses of Congress meant a somewhat reduced opposition in Rajya sabha that would help the passing of GST bill, the economy seemed to be on the right track with the corporate earning showing some turnaround with the quarterly results and prediction was bright on the monsoon front. Nifty seemed quite stable in the 8200 range and a march to 9000 was deemed to be possible by many analysts, over the rest of 2016.
Things seem to have unravelled fairly dramatically over the last month through. The exit of the RBI Governor, UK exiting the European Union and the FII reaction to all of this suddenly makes it a dicey situation for our markets. 9000 on the Nifty is clearly a far cry now, those same analysts are now talking once again of 7000 being breached. How should this affect your investments for the rest of the year?
Let me take the debt portfolio first as the changes here will be minimal. Assuming you are investing in PF, PPF and SSY you should continue to do so. People looking at regular income may want to lock in their money at the current interest rates. With the exit of the current RBI Governor, it is quite possible that there will be more aggressive rate cuts over the next few months. It is not improbable that the interest rates may well go south of 7 percent for most fixed income instruments. In such a scenario, if your debt products such as FMP or other types of debt MF are maturing, you will do well to look at alternative products which can give you slightly better returns. I think it is time to look at products such as Arbitrage funds, Equity Savings funds, Monthly Income Plans and other hybrid funds. Keep in mind that with indexation benefits coming down, taxes will rise in this.
What about MF investments? I sincerely hope many of you have stopped SIP by now, so that you have not been buying units at 8000 plus Nifty levels.Anyway, in the next 6 months the Nifty and other indices will definitely go down and this will present good opportunities of buying MF. You do not want to lose out on this by doing SIP – look at it this way, why buy units at 8200 when you can buy much more with the same money when Nifty comes down to 7500. I think there will be a Nifty level of 7500 in the next 2 months, just wait for it and put in your MF investments at this time. In simple terms if your SIP amount is 25000 Rs per month, keep it in your bank and when Nifty comes to 7500 invest all of it in one shot. What will happen if Nifty does not reach 7500 even by October or so? Well in that case you wait for a level just higher than it and invest at 7800 or so. Remember that buying equity is dependent on level and not on time, therefore buying at 7800 levels of Nifty in December is way better than buying in July with Nifty at 8200 or so.
Finally about stocks – again, I hope you are either having a stock portfolio or thinking about starting one. In the latter case, this is a great time to start. You will find a great deal of information in this blog both for understanding why and how to invest in stocks as well as several posts which will give you practical guidelines as to how you can build a long term stock portfolio. Forget about listening to the voices of negativity, shake off your inertia and go for it now.
The second half of the year will be very interesting times for our markets. How you invest in this period will have a significant bearing on the overall wealth creation for you.