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Sensex at record high. What should mutual fund investors do?

The key index, representing the top 30 stocks traded in terms of market capitalisation, may not have a direct impact on the investments made by many mutual fund investors. However, the benchmark index breaching a historical peak is a psychological...

, ET Online|
Oct 31, 2019, 12.40 PM IST
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The S&P BSE Sensex, the key benchmark index followed by most investors, has surpassed its previous historical high in early trade in the morning. The market bellwether breached 40,312 points it touched in June. Market benchmark BSE Sensex surged over 293 points to hit its record intra-day high of 40,344.99 on Thursday. The broader NSE Nifty too advanced 71.85 points, or 0.61 per cent, to 11,915.95.

The key index, representing the top 30 stocks traded in terms of market capitalisation, may not have a direct impact on the investments made by many mutual fund investors. However, the benchmark index breaching a historical peak is a psychologically-significant event for most investors. Some mutual fund investors get nervous about it, while some others get adventurous. What should be your strategy?

“Our outlook to the market is positive. We believe that the market is a key indicator to economic recovery. We have seen a low earnings growth in the past few years and we believe that if the earnings revive from here on, we are in a good spot. It is not surprising that the market is inching up because many stocks have hit a value zone. The near term earnings are a problem but the potential longer-term earnings remain positive,” says Neelesh Surana, CIO, Mirae Asset.

Mutual fund managers and advisors always maintain that investors shouldn’t get swayed by ups and downs, including scaling of historic peaks, in the market. They believe investors shouldn’t get nervous or adventurous simply because the market is at its all-time high. The indices are not governed by gravity – it need not fall simply because it has scaled a new high. Similarly, it need not touch historic peaks every day or week.

“The market going up is more often a feel good factor for many mutual fund investors. We have seen in the last couple of months that equity mutual fund categories have come out of the negative zone and many of them are offering double digit annual returns. So, I think it is a good thing for equity mutual fund investors. There is hope for positive changes in the market,” says Gaurav Monga, Director, PxG Consultants.

Monga also suggests that investors need not do anything right now. “Your portfolio returns might or might not be impacted by Sensex’s upward movement. However, don’t make any changes to your portfolio unless your asset allocation suggests that. Tactical calls in such volatile markets can be risky,” says Monga.

Market participants point out that hopes of the government cutting long term capital gains tax, dividend distribution tax and the securities transaction tax have been pushing the market up. Massive foreign fund inflow too boosted investor sentiments, they add.

“There are some challenges for the market to tackle but I believe those will be dealt with in time. Right now, we believe that the outlook is positive but the markets might continue to remain volatile. So caution is necessary,” says Surana.

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Sensex at record high. What should mutual fund investors do?

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