Faculty Seminar on Volatility to Continue

The year 2018 proved interesting. Equity markets ended a volatile 2018, up 5.9 per cent from the
start of the year. Crude oil prices, global trade-war tensions, rupee volatility, liquidity concerns
and policy action by central banks kept markets doubtful. The year 2019 too is likely to prove
interesting for investors, with markets bracing for near-term volatility from the outcome of a
major event – the general elections. We believe that the Indian equity market is neither cheap
nor expensive.

Several encouraging factors keep the markets upbeat. To begin with, the fall in crude oil
prices has been a sentiment booster, as it greatly reduces pressure on current and fiscal deficits.
Consequently, the rupee too turned around to 69.58 levels from 74 levels against the US dollar.
Above all, macro-economic figures are once again showing signs of financial stability. From a near
-term to medium-term perspective, equity markets are likely to be volatile.

This is because election years have proven to be volatile for markets in general. In the past,
across all election years – 2004, 2009, 2014 – markets have provided investors with intermittent
opportunities to invest. Policy decisions by the RBI, end of the bond-buying programme by
central banks globally, escalation of trade wars, pace of foreign investment inflows among
others, would be other significant triggers. In such times, the best investment strategy is to go
the systematic investment route to accumulate equities.

We believe 2019 is the year to systematically accumulate equities through SIPs and STPs,
keeping emotional biases at bay. Such an accumulation phase is generally a move to a bull run.
Thus, it is important to be patient and remain invested through this phase to make outsized
gains in the eventuality of a market upswing.The most recent example of this has been from
2010 to 2013. During this period, stock markets were largely range-bound. But, for those
investors who stayed invested, the rewards came in the years 2014-17 when the markets
entered a bull phase.

A Simple Five -Step Process

1. Asset Allocation: Design a customized portfolio based on your personal objectives, time
horizon and risk tolerance.
2. Portfolio Structure: Diversify across asset classes and market sectors
to maximize returns and moderate risk.
3. Tax Management: Increase your investment returns by reducing taxes.
4. Specialist Managers: Take advantage of the expertise provided by money managers who
specialize in specific areas of the market.
5. Portfolio Management: Monitor your portfolio on a regular basis
to evaluate manager performance and rebalance as necessary.

Dr Simmi Khurana