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Sensex headed further down? Mutual fund CEO says downside limited; here’s what investors must do

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Having fallen close to 40% from its all-time high, S&P BSE Sensex might have just reached the levels from where it will start to see an upward trajectory. S&P BSE Sensex may have a limited downside from the current level, said A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC, in an interview with The Indian Express. "While one can assume this will stay for some time, it appears that the market has discounted negative news quite substantially within a matter of two months from its peak period. This makes me feel the market may have limited downside from here, say about 6-8 per cent, and can settle at these levels and begin to move up when the news flow reverses in favour of stability," he said. Equity markets, according to him, will see a bounce back on the basis of hope and optimism, which he says "is the current missing piece'".

Balasubramanian, who manages assets worth nearly Rs 2,50,000 crore, said that the coronavirus pandemic and the news about its spread remains a 'hanging sword' with lockdowns hitting businesses hard across the globe. However, the veteran with over 26 years of experience in the mutual funds industry believes that the share market is now at an attractive level and investors should pounce on and invest more at current levels to build a stronger long-term portfolio. "Markets have recovered from substantial losses in the past as well... hence investors should not worry and remain hopeful of a repeat of the same upside that comes post a downtrend, as has happened in the past," he added.

Advising investors on how to tide over the current turmoil, he said that a good mix of actively managed equity funds, debt funds and index funds or ETFs is what could prove beneficial. He added, "MFs cater to all types of investor needs by offering products for different objectives from savings (liquid fund), income funds, long term wealth creation (large cap and multi cap funds) and for tax saving purpose (ELSS). Investors should have exposure across these four categories while planning their mutual fund exposure. When one invests only in equity, he is exposed to higher market volatility and this may defeat the purpose of asset allocation that can be achieved through diversified portfolio selection." 

Balasubramanian, who is on the Board of Governors of National Institute of Securities Markets (NISM), thinks that the lockdown due to the novel coronavirus pandemic will not just affect companies but will hit the savings of the public. "Such a sudden drop in earnings naturally will have an impact on the savings of public at large and there is a likelihood of change in the behaviour of consumer spending," he said. According to him the pandemic has taken away 3-4 months of earnings for majority of companies mainly in discretionary spending space, but sectors like travel, airlines, hospitality and ports will also witness earnings shortfall.