CEO Speak

Removal of political uncertainty is always a welcome sign for industries in general and the markets in particular. The markets have seen a surge post election results in India and the Mutual Fund Industry and the fund managers are looking forward towards stability and continuity. There are however multiple challenges that will have to be dealt with like boosting our GDP growth, controlling inflation, managing the PSUs and pick up in credit and investments. On the global front, US - China trade tensions re escalated in May with trade negotiations breaking down and tariffs raised by both sides.

During the month, Sensex and Nifty hit all-time high of 40,312 mark and 12,103 levels, respectively. Our advice to investors remains to look at the equity market for your long term goals and not get swayed by the euphoria or short term blips. Invest into the equity markets through the SIP route and stick to the habit of saving at regular intervals in equity mutual funds over a longer period of time. Hence the timing of the market must not play any role in one's investment decision, instead the time spent in the market will help one in their wealth generation.

The other things that impacted the market are the credit issues in the debt space. Since September last year we have seen certain institutions facing crisis and thereafter, multiple institutions have undergone liquidity concerns, some of them have been downgraded substantially or have defaulted. While this has caused a crisis, it is limited to certain segments of debt funds. However, because of these defaults there has been a fear element that has got created within investors in debt funds who are withdrawing basis their panic. Or given that a few companies are going through tough times, some of the investors are even shying away from investing into debt funds. Would that be the right strategy to follow? We believe that the answer to that question is "No".

There are different kinds of debt mutual funds and the risk varies from fund to fund depending on what kind of companies the fund has invested into. Investors must be aware of what is their risk appetite and financial goal and invest accordingly. We strongly believe that debt must be an integral part of one's portfolio. Our advice to all such investors is not to panic and instead clearly understand how to invest into debt funds. There are funds which are very high on the quality of their portfolio and have not taken any credit risk that they invest in, hence lower on the risk associated with them. There would also be funds where the investment objective would be to invest into companies with lower credit ratings for better yields which are coupled with higher risk, hence an investor must understand what he is investing into.

Funds which have better liquidity, low credit risk and lower volatility can provide reasonably stable returns for the portfolio. Funds like L&T Banking and PSU debt fund present an opportunity. It takes advantage of prevailing high accruals for 3-5 year horizon and invests only top quality Corporate bonds with relatively minimum credit risks.

Our strong urge to all investors is to define their financial long term and short term goals, understand their own risk appetite and then do asset allocation into different asset classes. And in a balanced portfolio direct equity, equity and debt mutual funds and traditional products can all have their own space which is guided by the financial goal of the investor, the tenure of the investment and clear understanding of the investor about the product.

Funds which have better liquidity, low credit risk and volatility can provide reasonably stable returns for the portfolio. Investors must look at the right debt funds for investment as per their financial goals and risk taking appetite. Funds like L&T Banking and PSU Debt Fund present an opportunity. It takes advantage of prevailing high accruals from 3-5 year horizon and invests only top quality corporate bonds with relatively minimum credit risks.

Our strong urge to all investors is to define their financial long term and short term goals, understand their own risk appetite and then do asset allocation into different asset classes. And in a balanced portfolio direct equity, equity and debt mutual funds and traditional products can all have their own space which is guided by the financial goal of the investor and the tenure of the investment.

Disclaimer – This document is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing.

L&T Banking and PSU Debt Fund

The product is suitable for investors who are seeking*:

  • Generation of reasonable returns and liquidity over short term
  • Investment predominantly in securities issued by Banks, Public Sector Undertakings and Public Financial Institutions and municipal corporations in India

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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