Market condition

A strategy that can work in any market condition for your portfolio

The most common investor concerns are:
1. Don’t know when to invest / when to exit
2. Not sure if it’s the right time for SIP or plan
3. Doesn’t know how to squeeze in volatile markets
4. Don’t know if it’s a good time to invest in equity or debt
5. Does not know how to manage the tax impact of inflows and outflows of asset classes
Because of this confusion and uncertainty, as well as the fear of missing out, an individual often ends up buying high and selling low and thus generate sub-optimal returns in the medium to long term. A disciplined approach to asset allocation can go a long way in helping an investor address these concerns while achieving above-average return with much lower volatility.
And so, the possible solution to achieving investment peace is to consider investing in funds that dynamically manage the allocation of stocks according to the level of valuation – i.e. increasing the exposure to equities when the markets are cheap and reduce exposure to equities when the markets are expensive.
IDFC Dynamic Equity Fund is one such fund that dynamically allocates money between equity, debt and equity arbitrage strategies based on a transparent valuation-based model. It automatically manages asset allocation and portfolio rebalancing between stocks and debt based on market phases. The model-based approach eliminates the need to time the market as well as the human bias of predicting and relying on trends.
The fund has a P / E model approach – the active allocation of stocks changes according to the price / earnings (P / E) multiple of the Nifty 50 index. -. When the P / E increases, the net allocation to equities decreases and when the PE decreases, the net allocation to equities increases. The equity portfolio is actively managed and follows a multi-capitalization approach with quality and growth as an area of ​​focus. While the non-equity portion – debt portfolio is actively managed with short to moderate duration focusing on maintaining high credit quality and is currently 100% in AAA or equivalent instruments. Since the allocation to equities and equities is always 65% or more, the fund therefore benefits from a tax on equities.
With the volatility reigning on the indices in recent months, the fund managed 50% active stocks on February 20, rose to 80% on April 20 when markets fell and reduced active stocks as markets fell. are straightened out and are trading at all. high leakage P / E ratios over time. Like October 20, the fund is exposed to less than 40% of active stocks. Within the active equity portfolio, the fund has 75% exposure to large cap stocks while remaining allocated to the mid and small cap segment. The fund is currently overweight the information technology, healthcare and telecommunications sectors, while it is underweight the financials and consumer discretionary sectors.
On the performance side, the fund generated healthy alpha relative to the benchmark and the Nifty 50 TRI over a 1/2/3 year period ending October 30, 2020. The fund’s philosophy of ‘buy low price and sell high ”, coupled with better stock selection, helped the fund outperform the indices as well as the benchmark.
Thus, this type of strategy is suitable for investors seeking stable risk-adjusted returns with lower drawdown over long-term investment horizons.
For the performance of the programs managed by the fund manager (Shares: Mr. Arpit Kapoor & Mr. Sumit Agarwal, Debt: Mr. Arvind Subramanian), please click on. : https://cmsstgaccount.blob.core.windows.net/prod-idfc-website-files/inline-files/IDFC-Performance-Table_5.pdf

Disclaimer: Content produced by IDFC Mutual Fund


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