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'Core inflation should start easing soon'

Print Edition: November 2012

Navneet Munot, Chief Investment Officer, SBI Mutual Fund, says gold should be a part of your portfolio -

Q. What has been the impact of recent reforms on stock markets?
A. The reforms have improved sentiment and led to large FII inflows. We expect domestic investors to join too.

Q. What is your view on interest rates?
A. With moderation in economic activity and stability of the rupee, core inflation should start easing soon, leaving room for rate cuts.

Q. Does the changed market scenario warrant a change in the investment strategy?
A. We have been asking people to invest in equities and take advantage of the downturn. Considering that it is difficult to time the market, people should invest based on their asset allocation plan.

Hence, anyone who is severely underweight on equities should invest a lump-sum in stocks. If the portfolio is balanced, a staggered approach by way of a systematic investment plan will be ideal.

Investors willing to take some risk can look at midand small-cap funds. As risk aversion falls, small- and mid-cap funds are likely to give better returns.

In fact, so far, the so-called defensives have outperformed cyclicals due to policy inaction and slowdown in growth. It may be the time to buy more cyclicals considering the turnaround in market sentiment and the various policy announcements.

On the fixed-income side, people have been investing in short-term and liquid funds. With interest rates easing and compression in spreads, long duration income and gilt funds as well as dynamic funds are expected to do well.

Gold should be a part of your portfolio as a hedge against loss of confidence in fiat currencies.

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