ICICI Prudential MF says equity markets are booming. Here is what investors can do now

ICICI Prudential Mutual Fund believes that the domestic equity markets are in the boom phase, citing high market returns, rising market valuations, positive sentiment, high earnings growth and production growth. The country’s second-largest money manager in terms of assets under management (AUM) prefers to invest in large-caps after the recent outperformance of mid and small-cap stocks. 

On a year-to-date basis, the benchmark equity index BSE Sensex has gained around 11 per cent till September 14. On the other hand, the BSE MidCap and BSE SmallCap indices have surged 28 per cent and 30 per cent, respectively, during the same period. All these indices are also hovering at their record high levels which they scaled this week. 

ICICI Prudential Mutual Fund recommends investing in diversified equity schemes which have the flexibility to move across market caps, sectors and themes coupled with hybrid schemes that allocate across different asset classes with an aim to navigate volatility. 

With sound fundamentals and multiple structural reforms underway, the asset management firm added that the economy is at the cusp of further upcycle in the long run. “Favourable demographics and demand too bode well for the economy,” ICICI Prudential Mutual Fund said adding long-term structural story remains intact with near-term volatility owing to global growth-inflation dynamics and evolving geo-political factors and uncertainties. 

The money manager further added that the country continues to hold its macro fort steady. “Post March 2023, Indian equity market valuations have become richer with upbeat sentiments on growth and profitability,” ICICI Prudential Mutual Fund said. 

It further added that there are a lot of catalysts at play. This includes government spending, fiscal and monetary support and improved balance sheets for corporates and banks which has helped India to move into the mid-stage of the business cycle. 

“In this phase, economic growth may continue to remain strong without inflation sustainably breaching the RBI’s tolerance band,” it added. 

Considering the present conditions, it also recommended shorter-duration schemes and dynamic duration schemes as they can actively manage instruments with various credit ratings and actively manage duration to handle interest-rate fluctuations.

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