2008-like crisis unlikely in Indian markets: Reliance MF

Amid growing concerns over the impact of bad news from the US and Europe on Indian markets, Reliance Mutual Fund has said the recent correction provides an attractive share buying opportunity for investors.

The country's largest fund house has also asserted that a doomsday scenario like the one experienced during the global financial crisis of 2008 was unlikely to return to Indian markets, as the variables are very different this time around.

In a research note, Reliance MF said: "In the current volatile environment, investors have started extrapolating the current context and speculating about the repeat of the doomsday scenario of 2008."

However, the current environment is quite different and most variables now are far superior in comparison to those prevailing at that time, it said.

"From an investor standpoint, we think notwithstanding the events/risks in the next few months, if one invests in equities now, in the ensuing period, one can expect relatively better returns over the following 12-18 months," it noted.

In the last few days, markets in India and abroad have fallen sharply amid mounting debt worries in the US and Europe.

The announcement of the US debt rating downgrade by ratings agency S&P last week further added to the market concerns.

Reliance MF said Indian markets have been under pressure for many months due to domestic macroeconomic concerns, as well as negative news flow on the political front.

"The recent global uncertainty has added to the market's woes. The US downgrade has probably acted as the last straw to break the back of the Indian investor's confidence," it said.

"Moreover, post the global financial crisis, the relative resilience of many emerging markets economies, in general, and India, in particular, has led to increased investors' faith in these markets," the fund house noted.

It said that global growth was being driven by developed markets in 2007-08, while emerging markets have emerged as the biggest source of growth in the last four years.

"Though not completely immune, the world economy is far less vulnerable to the US and other DM (developed markets) growth scare," it said.

Reliance MF further said falling prices of oil and other commodities could be an additional long-term positive for India and the "monstrous concerns of inflation and high interest rates might also be a thing of the past".

"While currently, a certain section of the market is worried about repeat of 2008, we believe as investors one should avoid panic and rather look at the current adverse environment as an opportunity," it added.

Source: http://economictimes.indiatimes.com/markets/analysis/2008-like-crisis-unlikely-in-indian-markets-reliance-mf/articleshow/9578059.cms

You can bank on mutual funds when markets are volatile

Accumulation of wealth through investments in mutual fund schemes is probably the best bet for retail investors - more so, in the current market conditions.

Investment advisers say in times of panic seasoned fund managers can protect your money better than many others and during a rally they can make the money grow faster than the overall market.

"It is normal to panic in these situations , but these are times when one can buy cheap," says Dhirendra Kumar, CEO, Value Research, a fund industry analytics and advisory firm. "There are long-term investment benefits from buying in a panic."

One of the first steps while investing in an MF scheme is to identify the purpose of such an investment: Whether the person is investing to accumulate wealth over a long period of time or the investment is for regular income. In the first case, a major portion of the investments should be in equities while in the other case it should be tilted towards debt funds. In the latter, to gain some upside from any rally in shares, a part of the investment could also be in monthly income plans (MIPs), advisers say. The combination of debt-equity exposure should change as the age profile changes. Here, the rule of thumb is that the percentage of equity exposure in a portfolio should be equal to 100 minus the investor's age.

"When one is in the accumulation stage over a long period, the portfolio should have high equity exposure," says Sumeet Vaid, founder & CEO, Freedom Financial Planners. "When the investment is for distribution (say the need for regular income for a retiree ), the portfolio could be 60% in debt, 30% in equity and 10% in gold funds," he says.

In the current market , some top MF schemes that Vaid prefers are HDFC Equity, DSP Blackrock Top 100, ICICI Prudential Focus Equity and Discovery and IDFC Premium , while on the debt side it is Birla Sun Life Dynamic Bond Fund and Reliance Gold Fund for investments in the yellow metal. Over the last year, while gold funds remain a clear winner with a return of nearly 41%, income funds have returned 9.6% and balanced funds a little over 8%.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/you-can-bank-on-mutual-funds-when-markets-are-volatile/articleshow/9575305.cms