Use the market crash to buy dips, diversify portfolio

Indian benchmarks ended at a 4-month low on Monday as the rapid spread of the Omicron Covid-19 variant triggered stricter containment measures across European countries.
Back home, too, different states continue to report fresh omicron cases taking the tally above 150.
What also gave ammunition to the bears was the merciless selling by foreign investors, who have sold Indian equities worth over Rs 33,000 crore since October 2021.
A weaker rupee, hawkish policy stance by global central banks, and interest rate cut by China amid slowing economic growth, too, bothered investors.

Given this, the BSE Sensex plunged nearly 1,900 points intra-day while the Nifty50 tested the 16,400-mark to hit their lowest levels since August this year.
They eventually settled at 55,822 and 16,614, down 1,190 points and 371 points, respectively.
Let’s go to Business Standard’s Avdhut Bagkar to know the key levels for the Sensex and Nifty.
As fundamental and technical concerns show further downside for the markets in the near future, we have with us Vaibhav Sanghvi, co-CEO of Avendus Capital, to suggest how investors should position themselves amid this sell-off.

However, if you are afraid to take the plunge in the equity segment, fixed income assets or safe haven like gold can be explored.
According to analysts, the end of the calendar year is always a good time to do a thorough check of your financial portfolio as the holiday season in overseas market always creates a volatile period back home.
Here are some steps that investors can take going forward.

As mid- and small-cap funds have far outperformed large-cap funds over the past year, it is advisable to rebalance your exposure to these sub-asset classes at current levels.
Secondly, looking at global stocks could be a better strategy at this hour as it can provide investors access to asset classes and themes not easily available in India.
Third; with the US Federal Reserve deciding to reduce liquidity at a faster pace and undertake three rate hikes in 2022, the high liquidity and low interest-rate scenario is set to change. Given this, analysts say sticking to quality stocks will be better as the shares decline less and recover faster.

Another option is to increase your allocation in debt funds. With most developed economies back on growth path, and inflation being less transient, central banks will gradually reduce adding liquidity and then raise their benchmark rates.
Hence, investors should take an allocation to debt funds, even though returns may remain in single digit next year too.
Lastly, analysts suggest investors to maintain a 10-15 per cent allocation to gold in their portfolio.

Overall a combination of active management, multi-asset strategies, and asset allocation is likely to provide better outcomes in the near term as the period of easy money making across asset classes is over, says S Naren, executive director and chief investment officer at ICICI Prudential AMC.

With no major event lined up in the domestic market, CMS Info System’s IPO and global trends will guide the markets on Tuesday.  

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