On Tuesday, the market capitalisation (m-cap) of BSE-listed companies saw a dramatic decline of Rs 31 lakh crore. This drop was the result of dramatic results in the General Elections, with the BJP led by Prime Minister Narendra Modi falling short of a simple majority. As a result, the combined m-cap of BSE-listed firms decreased from Rs 425.92 lakh crore on June 3 to Rs 394.84 lakh crore on June 4. The benchmark BSE Sensex also experienced a significant fall, losing 4,389 points, or 5.74%, and closing at 72,079. How will this affect your mutual fund investments? Will it lead to a portfolio restructure?
Trideep Bhattacharya, Chief Investment Officer, Equities at Edelweiss Asset Management, commented on the unexpected election results, saying, “The verdict differs from what exit polls predicted. Things should stabilise over time. I am not perturbed, and we do not believe in polarised holdings. We have stocks in the rural and consumer domains that are performing well today.”
Bhattacharya emphasised that the earnings of their invested companies do not change based on election mandates. “India’s capex utilisation is about 78-79%. A single market fall won’t drop it to 65%. Multiples that were once unduly high are now reaching rational levels. Today is driven by emotions. Overall, I would focus on earnings and the medium term. With a 5-7% correction, I would buy on dips rather than stay away,” he said.
What to buy? “We have added money to FMCG in anticipation of a rural recovery and IT, where we have seen a decline in share prices,” Bhattacharya noted. “These are the two areas where we have invested recently.”
Regarding PSUs like the railways and power, Bhattacharya said, “We didn’t participate in the recent run over the last 6-9 months. We are waiting for the right prices in these sectors before switching in.”
“It is better to buy in multiple tranches rather than trying to time the market. When the top has corrected 5-7%, one should start building gradually over time, assuming a return horizon of at least 3-5 years, if not more. If the current incumbent government remains in power, the policy direction won’t change significantly. The fundamental earnings story remains strong,” Bhattacharya concluded.