The stock market is down substantially from its January high, with the BSE Sensex now trading 40 per cent below its peak value of 21000. The price-earnings multiple for the Sensex over this period has corrected from 28 to 15 based on trailing earnings, which is well below the 10-year average of 18.
If you are planning to make stock market investments with a five-year perspective, this makes it a good time to initiate investments in diversified equity funds. Investors who already have equity funds in their portfolio should view this as a good time to overhaul their portfolio.
We suggest weeding out laggards and replacing mid-cap oriented funds with those that have a large-cap orientation. With stock selection likely to become more challenging in the year ahead and liquidity likely to remain tight, we think investors should stick with exposure to funds with a proven track record over both a bull and bear market.
These may hold greater potential to participate in a market recovery, as and when it materialises. Here are three funds that investors can accumulate for the long term.
Text: Business Line