- S. Naren urges investors to keep their portfolios balanced
- Investors relying only on equities face higher emotional and financial stress
- Three principles: asset allocation, opportunities against the market, long-term investing
- Much of the rally in small and mid-cap stocks is linked to cash flows
- ICICI Prudential Contra Fund NFO is open, till October 12, according to a report
Amid heavy volatility in the stock market, S. Naren, Executive Director and Chief Investment Officer of ICICI Prudential AMC, has urged investors to keep their portfolios balanced.
He says it is not wise to depend only on shares in this phase. He advises investors to combine debt and equity.
Why the markets are swinging
The ongoing market turbulence is linked to geopolitical tensions, rising crude oil prices and US 10-year Treasury yields at multi-year highs.
Crude oil has also reportedly touched $107-$108. High US interest rates are also keeping the environment unsettled.
Naren's key advice
According to Naren, investors relying only on equities may face more emotional and financial stress in this phase. He advocates hybrid or asset-allocation models.
He has outlined three principles for investors: asset allocation, looking for opportunities against the market, and staying invested for the long term.
- Contrarian investing: He asks investors to look for shares that have fallen because of market sentiment, not because of weak fundamentals.
- AI companies: According to him, prices of many global AI-linked companies have already been set on the expectation of perfection.
- Small and mid-cap companies: Much of the rally in these segments has come from cash flows, not from the underlying growth of business.
How to judge whether a price is right
According to Naren, whether a stock's price is right should be judged through the lens of safety margin, not market cap. He said:
“High market cap does not matter, as long as there is a safety margin and we are able to buy the shares.”
What next
The NFO (new fund offer) of ICICI Prudential Contra Fund is open. According to a report, it will remain open till October 12.
According to another report, the company's earnings call to discuss its second-quarter (Q2) results is scheduled for October 12.
