Use volatility in markets to book profit in global funds, say advisors

Experts say investors can use this opportunity to re-balance their portfolio

Jash Kriplani, Business Standard
8th January

International funds — which have been the top performing ones over the last one year with gains of over 20 per cent — are being recommended by advisors for booking partial profits, with escalating tensions between the US and Iran threatening to spill over to and also impact global indices. “Investors can use this volatility in global markets to take some profits off the table, especially those investors that are close to their investment horizon,” said Amol Joshi, founder of Plan Rupee Investment Services. In the last one-year period, international funds have delivered returns of 25.49 per cent, outperforming large-cap funds by a wide margin. The latter has delivered returns of 10.63 per cent, thanks to polarisation in markets that favoured large-cap stocks.

Experts say investors can use this opportunity to re-balance their portfolio.

“Investors can re-align their portfolio, in-line with their original allocations. With value of investments in international funds going up, investor allocations are likely to have also gone higher to these funds,” said Vidya Bala, co-founder at According to industry observers, international funds had been attracting investor interest as domestic-focused funds have struggled to beat their benchmark returns.

According to a study, around 50 per cent of 200 actively-managed equity schemes had underperformed their benchmarks in CY19. Mid-cap and small-cap schemes — where retail investors had expected to make robust returns — have been the worst of the lot. The mid-cap and small-cap funds have delivered 3.5 per cent and 0.08 per cent returns in one year.

Advisors say that while investors can book partial profits in these schemes, they should continue to maintain some allocation. “International funds help from the point of view of diversification. Investors get exposure to different markets, rather just being exposed to domestic markets. Second, it also gives currency hedge, if the investor has dollar expenditure for foreign travel or for higher education of children,” Bala added.

According to experts, a weaker rupee and strong dollar is also a factor that can benefit international funds.

“International funds largely invest in companies that earn their revenues in dollar terms. This works favourably when rupee is seeing a depreciation,” said a fund manager. The rupee is expected to depreciate further as tension brewing between US and Iran can lead to spike in oil prices, and lead to further widening of current account deficit. Amid fears of spike in oil, the rupee breached the 72-mark against the dollar this week.

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