'Investors should continue with their SIPs, especially during market corrections.'
'For those looking to start new SIPs, beginning with large-cap funds is a prudent strategy, followed by flexi-cap and value-oriented approaches.'
The announcement of tariffs by US President Donald Trump has triggered a stock market correction worldwide.
S Naren, executive director and chief investment officer at ICICI Prudential Mutual Fund, tells Puneet Wadhwa/Business Standard over a chat that while there is fear in the market today, valuations haven't reached cheap levels yet.
Are the markets overreacting to Trump's tariffs? Do you expect a rethink on Trump's part regarding the quantum of the levy?
We believe there has to be a rethink on the quantum of the levy imposed on different countries.
The current level appears quite high and may be subject to moderation.
Given past precedents, it's difficult to predict how the process will evolve, and our ability to assess the final outcome remains limited.
How different is the current market correction from previous ones -- such as during the COVID-19 crisis, the Global Financial Crisis, or the dotcom bubble? Would you consider this a black swan event?
The current correction has been triggered by a government policy.
When corrections are policy-driven, reversals are easier because policies can be rolled back.
In contrast, events like COVID-19 are structural shocks with uncertain timelines.
As a framework, when any asset class becomes overvalued -- as seen with the 'Magnificent Seven' in the US -- it becomes vulnerable to corrections triggered by external events.
Is this a good time to look for potential multibaggers?
The best time to invest is when panic grips markets and valuations are attractive.
While there is fear in the market today, valuations haven't reached cheap levels yet. Some stocks are fairly valued, but not deeply undervalued.
During the 2000 dotcom and 2020 Covid correction, valuations were significantly more attractive.
However, from an asset allocation perspective, large-caps are now relatively more appealing than they were in September 2024.
Amid all this gloom, are there any silver linings -- in India or globally?
India is well-positioned macro-economically, with fiscal deficit, current account deficit, and inflation under control.
The key concern over the past 18 months has been elevated equity valuations.
With the recent correction, large-caps are now only marginally overvalued as per our models, while small-and midcaps continue to be expensive.
Another positive for India is that it's largely a domestic-driven economy, unlike many export-oriented markets.
What are your expectations from the March 2025 quarter corporate earnings? Can a disappointment here trigger the next leg of the correction?
We expect the earnings season to be largely stable. There are no indications of major surprises that could significantly alter market expectations.
How are you navigating the current market environment?
We continue to invest through hybrid and asset allocation funds, guided by internal models that suggest buying during market corrections.
For retail investors, we advise continuing to invest in equities, based on their asset allocation plans.
Over the last 18 months, we've emphasised the importance of diversification across asset classes, and that framework remains unchanged.
What should mutual fund investors do now?
Investors should continue with their systematic investment plans (SIPs), especially during market corrections.
For those looking to start new SIPs, beginning with large-cap funds is a prudent strategy, followed by flexi-cap and value-oriented approaches.
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Feature Presentation: Ashish Narsale/Rediff.com
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