LIVE | Investment Strategy In A Market Correction | MF Corner | CNBC TV18

#MFCorner | Investing In A Market Correction

Catch Pavitra Parekh & Sonal Bhutra in conversation with Mohit Gang, CEO, Moneyfront about investing during a market correction & his hopes from the Budget.

#MutualFund #investment #invest #market #marketcorrection #midcap #smallcap #budget2024 #budgetwithcnbctv18 #cnbctv18 #businessnews #businessnewstoday #businessnewsinenglish #sharemarkettoday

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Super end of 2023 rally we also had some big single stock Falls or you know uh names like the widely held HDFC bank which featur in a lot of portfolios names like poab Z so for a lot of investors you know who got used to a

One-way ride up this can be a time of a little bit of nervousness so what do you really do as a mutual fund investor do you need to change your strategy at all and what do events like a budget coming up really mean for you sonal uh let’s

Find out because these are questions that we have been getting and you know there are a lot of investors who would have gotten in thinking that things could be like 2023 so it’s best to tell them that that’s not the case and on that note let’s welcome M gang who is

The chief executive officer at money front Mohit always a pleasure speaking with you thank you so much for joining us and as pitra was mentioning it turned out to be very different from that high note that we ended 2023 with in times like these when you see that market is

Pulling back from alltime high you’re seeing stock specific action as well what do you suggest a mutual fund investor should do what should the strategy be in times like these because that is something that could happen anytime oh absolutely thank you so much son and pavitra always a pleasure uh

Look so I think the year started with a whimper uh people were anticipating on the back of an extremely robust 2023 that markets will like continue a good rally and good momentum but I think there were some events there were some uh news flow around it and the market

Was a little timid at the start of 2024 but again we have kind of uh picked up some momentum in last two three odd days right so markets will continue to operate in this fashion honestly I think for investors who are extremely long-term investors who are patient investors who are especially mutual fund

Investors right and who are wanting to create wealth for themselves or planning for their retirements uh I think for them nothing changes honestly events will come and go calendars will keep changing and months will keep passing by but uh people who are following a disciplined approach towards investing I

Think that cannot uh pause or that cannot take a break at any point in time one has to continue with his or her asset allocation uh if you are whatever 50 Equity 50 debt you cannot get overdrawn or overcommitted in a market which is extremely uh momentum driven

And you cannot also pull out of the market which gives you a little bit of a jerk kind of a scenario or a correction kind of a phase right if you continue your asset allocation the way it has been the way you have planned for your financial goals there’s no way you will

Go wrong in this entire thing if Market continues to do extremely well you can always shave off some profit and plow it back into debt and maintain your asset allocation and that ways you also consistently maintain the cash flow scenario of yours right so you are always sitting on some debt you always

Have some Equity to play with the momentum provided you follow your asset allocation right and I think that’s the only philosophy which one should stick by oh absolutely and we’ve spoken about this so many times right that every year there will be some amount of a correction that comes through you can’t

Get out of the game then but you know moit we often see a rush of retail to the markets when we at alltime highs right which is a little bit uh opposite to maybe what should be happening just because of maybe the for more Factor do

You think we need to train ourselves to you know every time the market offers you a correction like this maybe put in lumpsum money at those levels well look I think that’s that’s one Trend which never seiz us to die right uh as soon as you see markets uh going at a frenzied

Level or extreme amount of momentum the retail money tends to increase which is what should not idly happen I think the reverse is what you would like to see and hope for but honestly that doesn’t happen every time you see momentum people have and as now I cannot sit out

Anymore it’s very difficult to watch the game from the fence right so you all want to go out on the in the middle and play the game yourself and that’s what is happening also right now uh so look again it it comes balls down to discipline if you have the discipline uh

And if you keep some Pockets aside you should always have dry gunpowder I have of the firm belief in these kind of crazy markets when the valuations are soaring you still can’t be out of the market you have to be in the game but you have to keep some dry gunpowder at

All points in time and whenever markets give you that opportunity in the past 43 years of Market history there’s not been a single year when you have not seen more than 10% correction in the market you will get that opportunity provided you have patience to last the uh game

With some dry cash uh by the side as in when Market gives you that opportunity you have to have a fixed formula it can be any formula depending on your asset allocation a 5% correction will mean that you put in another 5 10% of your

Cash which is lying idle or you can you can shape the formula as per your own asset allocation and and financial plans but you need to have cash uh for opportune movements you make money slowly and then suddenly right from gradually it comes to sudden but in that

Case we talking about a time where there could be correction in the market or we could see some consolidation what are some of the mistakes that investors make apart from not being patient when Market corrects and what is something that you think can be avoided and it’s easy and

But investors just don’t put so much effort at that point in time look I think I think it’s one of the often quoted thing that when it is uh when you’re getting uh when the markets are at a frenzy level you need to be a little fearful and one markets are uh

Whatever a little skeptical you need to be more greedy but that doesn’t happen in Practical life honestly we’ve seen it time again uh so one keeping some cash uh which is extremely important as I said second is to follow your asset allocation to the T if you deviate from

In and if you if you get tempted in the market Cycles that’s when the most of the investors tend to commit mistakes they get tempted and they kind of commit themselves with huge amount of capital and some sometimes they liver themselves up sometimes they will raise debt and

And and and that’s the uh starting point of all the uh what do you say downfalls of many investors right and plus if you have a process which is that if you’re doing some sips stps if you have a regular flow which is getting committed into the market there is no need for

Anyone to stop it irrespective whether the market is at a crazy high or irresp perspective whether the market is uh correcting big time right you have to always think it of in a very basic manner in times of Corrections you’re accumulating more units in times of uh

Bullish uh phases of markets you are actually riding the wave and your value is increasing right so both ways the philosophy of sip will keep you intact so the whole thing which investors need to avoid is to rush out at bad times and redem when the portfolios are showing

Red and we see time in and time out that investors get uh extreme fearful of the market Corrections with every correction they anticipate more correction and they rush to take out money rather than putting in more money at those times so I think those are some fixed discipline

Formulas which one needs to follow okay that’s very helpful I’m sure everyone can benefit by hearing that but you know moit this past month we’ve seen some huge Corrections in stocks right names like HDFC it’s there in most portfolios right I mean then you have something

Like a Z falling 30% in one day polycap which used to be an investor favorite right all of those stocks so it does create some amount of nervousness what do you do if you find yourself exposed to these stocks via your mutual funds because I mean clearly you cannot

Immediately exit either the first thing you should do is you should thank God that you are in a mutual fund honestly and which is which is so and you’re not you don’t have the stock directly in your Holdings and that’s the whole uh Genesis of why you invest in a fund

Because you are covered with a basket of 50 70 odd stocks right so your downfall and your upside also is Capa to a level but your downfall is is kind of covered right uh when it happens with names like HDFC and not for any other reason but

For sheer reason that the results were not in expectation with the market uh uh numbers right when it happens with those kind of names you can’t do anything to be very honest it’s the it’s the largest company by market cap in the country every fund has it every scheme has it uh

So you can’t do much about it you fall with it you sink with it you rise with it right so you have to you have to go with the flow uh there will be some smart fund managers who would have gone underweight HDFC doesn’t mean that they

Don’t have HDFC right they will not have it as per the market weight and sdfc is almost 30 kn% on on on the indices in terms of weight so a good fund house will still have 9 10% of it most of them are underweight because they can’t go

Above 10% right so any which ways they are underweight sdfc uh by default the second part which is when it happens with other stocks which are not uh available uh so hugely in all the schemes and which and the correction happens because of some negative news flow on the stock itself or the

Promoters or some kind of uh uh let’s say fraudulent activity or right so I’m that is a red flag for sure and you need to figure out that the schemes which you’re holding are they going through such instances time in and time out and I’ll go back to the debt

Analogy here in 2019 when the island FS crisis happened you could have figured out two or three schemes or fund houses in the market which had Island FS which had Sr which had dhfl which had syntax and they had all the names right so and

That’s a sure red flag and if you have all these kind of names which are cropping up in the same fund house or cropping up time and again with the same similar kind of schemes then definitely there’s a there’s a red flag around so if this these instances repeat too often

That you have these kind of stocks in a portfolio and they get uh uh exposed uh very frequently then one has to take a cautious stand and perhaps uh come out of those kind of schemes but otherwise I think Market episodes can can it’s also like picking a stock right you have to

Do your research even if it’s a mutual fund which is a basket of stocks or a singular stock so that takes me to the most interesting topic that people spoke about last year that was m and small caps they’ve been doing well so so far this year as well they’ve not done so

Badly after that Stellar rally uh is this time to be cautious totally yes okay uh so look I think uh no amount of momentum can continue for so long can persist uh for an irrational amount of time and honestly I think it’s been uh overdone the kind of stretch which we

Have seen in uh some pockets of mid and small caps not the whole basket per se uh but I think investors have to be cautious this is abnormal return was they have uh actually Reed last year some 43 or% on midcaps and some 48 OD per on small cap indices and I’m sure

There are few active funds which have outdone these numbers as well right so one has to take a cautious stand and you have to see relative value always and relative value today is hugely available on the large cap space on the Blue Chips it gives you that question if markets

Correct it saves you from that extreme volatility it gives you the benefit that it will be the uh uh capitalization which will bounce back uh the earliest in case of a correction and plus the relative valuations are still quite reasonable and lot of large cap names

Lot of the banking packs all the heavy weights right Reliance has just rallied last two years two two days honestly it hasn’t done much for last three years or put together and so uh is the case with all the large private Banks or perhaps the it pack right so those are yet to

Rally there’s a lot of value out there be safe A little cautious perhaps a little overweight on the large caps and Blue Chips okay God that that is actually voice that you know an opinion that we’ve been getting time and again from all of our experts uh so you know

Caution is definitely warranted but you know another space which has seen a lot of momentum in terms of mutual funds has been this entire sector and thematic funds right we saw psus do well power do well this AI theme just completely took off as well so if we’re talking about a

Year of more moderate returns and you are someone trying to generate more Alpha you’re maybe willing to take some more risk do you think this is a good uh kind of fund to get into look with sectoral funds you have to be extremely cautious and you have to read the

Sectoral Cycles really well and you have to be honestly uh capable enough to take a call when to exit enter is quite easy honestly you see the momentum you ride the wave and you sail with the with everyone else but just when the uh tight turns it’s when uh you will get exposed

Right and we have seen it time in and time out again uh just to give you an example uh let’s say Pharma from 2016 till 2019 all years all four years was negative return and suddenly you saw one year which was because of you saw huge positive returns lot of investors

Flogged into Fara by 2020 second half end 2021 was an extremely low single digigit return for farma and again 2022 was a negative year and then you again saw 2023 a little bit of a bounce back right so you can’t just really predict these kind of Cycles PSU last 10 years

Pitra there have been five negative years and negative to a large extent likeus 20us 32 those kind of negative years right wants to make up for everything in one year so you have to be extremely cautious reality was a boomer last year some 79 odd per return uh for

The sector put together right so now again to think on back of that kind of a performance it again give you uh those kind of returns you have to be extremely lucky or skillful right and uh it’s it’s a very tough combination to get uh right

So my sense is be safe in flexi cap funds let the professional guys do their job uh let them do the uh manage the Cycles let them manage the market caps for you and I think just be safe in a flexi cap or a multicap in 2024 if you

Still make that kind of money in royalty stocks that definitely luck in a Consolidated Market the kind of moves that we’ve seen But Mo if we have to get into a quick break when we come back we’ll continue this chat because it’s been an interesting one and also we’ll

Talk about some budget expectations that’s the big event a day after tomorrow so we’ll discuss that in a lot more you stay tuned we’ll be right back Finance Minister Nala sitaraman is all set to create history as she presents her sixth consecutive Union budget what

Will the budget mean for you and for me stay tuned to CNBC TV8 on our YouTube channel as we analyze the budget in real time and bring you the best analysis stay tuned to CNBC TV8 your budget headquarters on YouTube welcome back you’re still tuned in to MF Corner we have with us Mohit gang and we are talking about the key expectations from budget now after talking about how to uh strategize during a market Fall uh now you know mu we know it is a crucial

Time for the markets we have the budget the fomc decision we do have the RBI policy all of them coming together in a time like this um any change in investment strategy would you suggest or do you think it is to be disciplined and continue with your strategy I think

You’ve answered it right so to be very honest I think these are uh periodic events some are quarterly some are monthly and budget obviously is an annual event it comes and goes every year obviously those two three days are significant uh if you are a stock Trader

Uh if you are uh closely following sectors and if you’re closely following some themes or if you have thematic funds in your portfolio let’s say right you might want to follow government action you might want to follow government announcements around the budget and anyhow I still think it’s a

Policy statement it also gives you directional uh space uh one year forward and perhaps sometimes 5 year 10 year forward Outlook also so one has to be extremely cautious getting into this kind of a thing you have to be a good reader of these kind of events but you

Don’t have to like really Panic or you don’t have to press the button of uh purchase or Redemption either ways right so one has to continue to do his regular investments in the normal fashion but you cannot like sit away from the event and and just be a bystander so but as a

Mutual fund investor you think that you don’t really need to you know do anything at all and you can uh you can just continue to Hold Your Position there’s nothing that you need to do before or after an event like this right like a budget not really pavitra

Honestly I think there is very little that you can any which ways plan and do for these events because no one knows what exactly is likely to come out and these are all surprise packages and this year any which ways uh budget is not a full-fledged budget it’s a vote on

Account so uh obviously you will have enough time there are certain times when some kind of uh uh calls do happen like the debt uh taxation which happened last budget and which can completely change the texture of your portfolio so one has to be cognizant one has to be aware has

To go through the fine print but again you can’t take a uh do a panic reaction prior to the event and you can’t preempt such decisions right uh but generally what is the expectation from the mutual fund industry this would be the interim budget but in the budget for July is

There a big expectation from the industry look honestly I I think government is trying to nudge people towards the new taxation uh uh to adopt the new tax policy it is also a move towards DTC in the long run which sooner or later will happen whether it happens

Uh to some extent ENT in this budget is is uh will have to be seen But if you ask me what is my hope and expectation I think one of the biggest things is that the taxation for different asset classes and sometimes within an asset class how

A particular uh instrument is taxed is completely different just taking a small example if you hold a gold fund today your tax like debt it’s completely texed if you hold a physical gold right you get indexation benefit and you pay 20% long-term capital gains tax if you hold

Sgbs which is sovereign gold bonds you have completely taxfree returns after 8 years gold is gold finally the color doesn’t change but the taxation changes the way you kind of hold it right so there are multiple anomalies in in in uh in multiple uh kind of categories or asset classes let’s say international

Funds right international funds are finally uh underlying is equity in most of the cases but they still get taxed uh as debt because the Clause says you have to have 65% exposure in indan or domestic equities right so they don’t fulfill that criteria so these are few uh nuances which have never got

Addressed my sense is if something happens which kind of balances all these factors makes the taxation a little more uniform and easy to understand across different asset classes I think they’ll go long way in simplifying investment uh calls for investors okay that’s I guess a good one and hopefully it does come

Through at least in the July one like sonar was mentioning you know low expectations from this budget uh anything you expect or would hope for for the debt funds look if if I was on the SLE I would completely go back one year uh back and change the clock

Honestly I would get the indexation benefit to debt uh honestly I think it’s hard ear money when people Park in safer instruments they want their money to be safe and if you can’t fight inflation which is what you’re parking your money for right then you are actually pushing

Them towards riskier asset classes which is not uh uh which idly should not be the framework uh around that you can’t push investors to go into equity and foro uh savings uh but I don’t think so that will change I think it’s done for good now uh one thing which I hope for

Is that like you have Equity link saving scheme which is a completely uh where you get ATC benefit tax advantages by investing in a three-year logged in tax saver scheme you should have a dlss which is a debt link saving scheme so that people who don’t want to take

Equity risk but still want to have Tech saving advantages they should have an option uh going into a dlss okay all right so time will tell whether anything out of it actually comes true but thank you so much M for joining us today and we’ have spoken about a whole host of

Things uh investing during Market correction and what we’re expecting from the big event as well so thanks a lot and with that we’ll take your leave on this edition of MF Corner today but you do stay tuned closing bell will come up to take you through the last hour of Trade