We have released our Recommended Funds for 2017 and in line with our practise; we are revamping our portfolios to incorporate the changes made to the funds. In our note on Recommended Funds released last week, we had written that we are receiving queries from Investors to know if we are revamping our funds and portfolios to align with the demonetization drive by NAMO.Our view is that Mutual Fund portfolios which are created on the basis of risk profile, goals and time horizons should not be revamped on the basis of a particular event intended to benefit the economy as a whole in the long term.
We maintain status quo in asset allocation as we continue to remain neutral on India with a 3.5 star ratings for the country. The question that many investors have in mind is “Has the demonetization drive put a brake on growth which was picking up across the different sectors of the economy”? We believe that India Inc’s 2 quarters might be bad, yet this measure will finally have a positive impact on the overall economy. We are of the view that should the government be able to check the parallel economy, inflation, which is one of the biggest nightmares of the policy makers, will be on a downward trajectory in the coming months. If this drive fills the Government's coffers and it comes back into the system in the form of investments, then the long term benefits need not be mentioned. To add to it, valuations look attractive from a 2-3 year perspective and hence Investors should start taking exposure into the markets.
Table 1: Portfolio Fund Allocation Changes