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ICICI Prudential Mutual Fund Market Outlook


Financialisation of Household Savings

Inflows in Equity Mutual Funds

2017 has been the year of investors opting for financial assets over physical assets. Retail investors pumped in record Rs 1.3 lakh crore in equity mutual funds in 2017 on account of muted returns from gold, real estate and other traditional investment avenues.

Growing Equity assets
The strong inflows pushed the asset base of equity MFs to Rs 7.7 lakh crore last year from Rs 4.7 lakh crore in 2016.

SIP – Preferred route

Retail investors invested Rs 53,000 crore through SIPs, which has been one of the highlights of 2017. At the same time, the industry added over 9 lakh SIP accounts each month, on an average, in 2017. We believe this trend is likely to continue this year as well.

Market at all-time highs

Market Scenario

It has been observed that retail investors who have been on the side-lines have started coming into equities. This is at a time when the market is at its all-time high. Given that most of these investors are first time market participants, they may not be fully aware of the risks associated with equities i.e. short term volatility. Therefore, we have been advocating investors to diligently follow asset allocation.

Investors should follow Asset Allocation Discpline

In a trending market, investors often tend to go overboard with equities. Instead, we believe, this is time to check on one’s asset allocation, based on one’s risk appetite. This is because maintaining Asset Allocation discipline allows investors to create wealth in the long run, by being optimally invested across asset class.

We advise all the investors to consult a financial planner such that their asset allocation is a planned one and could match their financial goals. For those investors who are already invested and are looking for further allocation between debt and equity, we have product named ICICI Prudential Balanced Advantage Fund – which dynamically manages between debt and equity, based on market valuations.

Investment Ideas

For First-time & Conservative Investors

When it comes to investors who are investing into equities for the first time, given the market highs, we would recommend such an investor to opt for ICICI Prudential Balanced Advantage Fund. The reason being such a fund allows one to take exposure to both debt and equity, but based on relative attractiveness of either of the asset class. This means as the market goes up; the equity exposure is reduced while the debt exposure increases. Because of such a construct, in case of a market correction, the fall is cushioned because of debt component, thus minimizing risk and aiming to provide good long term returns.

The current equity allocation of this fund is 38%, considering that market levels are high. As and when markets fall, the allocation to equities will increase.

Investors who missed equity rally

For investors feeling left out too, ICICI Prudential Balanced Advantage Fund is a suitable product. Instead of losing out on further opportunity, one can invest right away into equities.

For high risk appetite

For aggressive investors who understand what equities are the risks associated, we would recommend ICICI Prudential Dynamic Plan and ICICI Prudential Balanced Fund.

Alternatively, investors could also invest in large-cap schemes like ICICI Prudential Focused Bluechip Fund, which follows benchmark hugging approach. This is because on valuation basis, large-caps are relatively attractive as compared to mid and small caps. ICICI Prudential Value Discovery Fund is another scheme for those investors who are looking to create long-term wealth.

On Debt Market

Debt market currently is going through some short-term volatility owing to the uncertainties surrounding oil prices, upcoming Budget, fiscal discipline etc. However, we believe, on valuation basis, debt is attractive. With debt suite, we recommend investors to invest in ICICI Prudential Short-Term Plan, ICICI Prudential Long-Term plan or ICICI Prudential Regular Savings Fund.

Mr Amar Shah, Head of Retail Business Said, “For those seeking incremental allocation to equities can consider balanced advantage category of funds. This is because such funds can allocate towards both equity and debt based on relative market attractiveness. Moreover, the markets are no longer cheap and one should adopt a cautious approach while investing at current levels.”

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