Market might witness 3-5% correction, volatility | Economic Times

As the post-budget rally continues in the market, Jinesh Gopani believes that the market crashing from here is a bleak possibility. He advises investors to stick to their investments for a longer period of time. “Lump sum money might come and go depending on the nature of money, but sticky money continues to stay. I guess we should start seeing inflows coming back in three to four months, once things stabilise,” Gopani says. Edited Interview.Recent AMFI data shows another bout of outflows from equity mutual funds. What are your views about that?There are various reasons being ascribed to this investor outflow, but fortunately, at least the SIP book continues to remain strong. Maybe, some money is going out, but NAVs were affected due to COVID and some people may be using that liquidity to buy houses, or for family and health purposes. I don’t know the real reason, but these may be some of the reasons. Or maybe some are taking out money and investing directly into the market because they feel they understand the market now after this phase.But I can say that retail investors have been putting money judiciously in the form of SIPs. Lump sum money might come and go depending on the nature of money, but sticky money continues to stay. I guess we should start seeing inflows coming back in three to four months, once things stabilise.How much profit booking is okay? Should investors stop fearing the possibility of a major market correction? Or do you think there is a need to book profits since the indices are so high?It depends on the risk appetite of the investor and how much he has invested in the market, depending on his total savings and how much his equity is etc. What I would however say is that for the market to crash, there should be very strong reasons in the form of some ‘Black Swan’ event. In that case, the market will correct significantly. When you come out of such an event that happens once in 100 years, hopefully you should have a good run for at least two to three years.However, the volatility in the near term cannot be ruled out depending on various factors like flows, how the currencies are moving, how the US-China relationship goes. Market may correct 5-7 per cent and volatility will be our friend, but market crashing because some people sitting outside want to invest, that is not going to happen.Before the Budget, markets were nervous, and we saw outflow from FII to the tune of 7-8k crores, and markets came crashing down by 4-5%. Post budget, though, the markets recovered in just a day, and since then, till date, FII’s have invested close to Rs 15-16k crore.What are the dos and don’ts for retail mutual fund investors at this stage in the market?The biggest risk to investors is going direct into the market and buying all kinds of stories. When a market crash happens, all penny stocks crash by 40-50 per cent. Investor money gets stuck because it is difficult to sell those stocks also. If you are not ready for that kind of a risk, invest through mutual funds, SIPs etc.With the markets touching historic highs, a lot of youngsters might enter the market. What should millennials keep in mind before entering the market to invest?They would be reading up quite a bit on the internet before investing. They should read a lot about the various portfolios of the schemes and fund houses and take informed decisions. There is a lot of information available. I would say invest for a long term. When you invest for the short term and seek returns, the process becomes risky. Importance of compounding will only be known in five to ten years. Have a proper understanding of which fund you’re buying and why you’re buying.What are the sectors that are your current favourites in the market?As per our internal estimates, all are favourites. We are not trend movers or trend setters or anything. However, after the Budget, things have started stacking up. I think financials are a great place to be in, especially as the asset quality cycle improves. I am talking about financials all across - banks, insurance, exchanges; anything in financials should hopefully do well.Anything related to infrastructure, property- be it capital growth, be it home improvement company, real estate, housing finance companies. And the third would be technology because that is continuing very strongly - including the Internet place.What are the kind of categories small investors should look at?It depends on the age profile of the investor. If you are above 50-55 years, you should not be taking excessive risk and should go for large cap portfolios. Those who are between 27-50 years, the best way to invest is via the flexi cap category. They will invest all across and it will benefit on the upside as well as downside.