‘Any turmoil in crypto at present will destabilize the markets’

For a long time, there has been a possibility of a sharp fall in the markets. Could China’s Evergrande Crisis Be the Trigger?

It will be impossible to predict which event will lead to its correction and timing as the market continues to mount a wall of worries. While the Evergrande crisis may cause some growth slowdown in China, it may not cause any systemic issues given the Chinese government’s ability and track record of acting quickly.

The Central Bank’, particularly the US Fed, commentary and further action will be the most important events that will be watched eagerly by market participants to err on the side of caution.

The fixed asset allocation for DSP Flexi Cap Fund is 65-100% Equity. But, at present, the fund is around 97% equity. Do market conditions warrant a reduction in equity allocation?

Equities as an asset class are in a sweet spot, given the powerful macro-environment evolving globally, where growth is finally making a comeback with some degree of inflation.

Equities benefit from adequate liquidity and low interest rates as normalization of easy monetary policies is likely to be very gradual. In the case of India as well, all the drivers of the economy viz. Exports, infrastructure, real estate and finally consumption are up for fire.

How will the demand for a passive style of investing impact the mutual fund industry?

Passive investing has its merits in terms of index neutrality and low fees. Its ratio to Overall Asset Under Management (AUM) can definitely increase. But we see that growth in overall AUM will be strong enough in itself, and active investments are still making up a large part of that. As we again enter a broad-based growth phase, active managers have the opportunity to generate alpha by leveraging their stock selection capability.

If a new investor is coming into the market ₹1 lakh in hand, what should be his strategy?

We would advise investors to stick to their asset allocation and keep investing in each asset class as an allocation plan instead of changing it according to market level. If the allocation pattern requires investment in equities, the investor can go for it in one go or through a Systematic Transfer Plan (STP) over the next three-six months.

It is very important to note that after such a breakneck rally, a repeat cannot be expected in the near term and investment needs to last more than five-seven years to expect good returns from these levels. it occurs.

Do you think that cryptocurrencies being regulated as an asset or commodity will have any impact on the mutual fund industry?

Any volatility in this category would invite volatility in the markets, given the wealth and scale attracted by cryptocurrencies over the past few years. All other assets could see some correction in the short term if the regulations lead to a massive drop in crypto values ​​and destruction of wealth.

But stock prices are underlying business unlike crypto and should see a bounceback soon with a change in allocation.

It would be better if governments and central banks start regulating cryptocurrencies as soon as possible before the bubble gets bigger.