Events That Will Make IIFL Up Equity Exposure
Clients are currently looking at their investment portfolio as an instrument of wealth preservation rather than wealth creation, according to Karan Bhagat, managing director at IIFL Wealth & Asset Management Ltd.
“It means ensuring your capital is intact, plus protecting for inflation as well as small consumption needs,” he said, adding the targeted return is usually between 9 and 12%. The company is trying to ensure that clients earn consistently in the medium to long term, without a large draw down in their portfolio.
“60-65% is fixed income, 30-35% is equity and 5% is real estate,” he said in an interview with BloombergQuint. “Gold would be less than 1%,” said Bhagat—who was accompanied by Nirmal Jain, founder and chairman of the IIFL Group, and R Venkataraman, managing director of IIFL Securities.
According to Jain, exposure to equity will increase as volatility and risk reduces and earnings outlook improves. And that, he said, would be driven by demand and companies getting their margins back. The stock markets won’t wait for the actual results to come but stability should return once analysts upgrade earnings.
Bhagat said, “Essentially there’s a client who’s ideally sitting on a 50-50 allocation—50% equity and 50% fixed income. Today he would be at 35% equity, which means 70% of his target allocation. Below the Nifty 50 level of 9,300, every 500-point correction we would add 2.5-3% till this 35% moves up to 50%.”
Similarly, on the upside if for any reason the market moves north of 10,800 over the next 30 days, “we would start reducing our equity exposure”, he said. “We would typically never go down below 25% and never go above 60%.”
In the current time, only if the Nifty comes down to 6,500-7,000 levels, would the client portfolio be inverted where he would have 60% equity and 35% debt.
According to Venkataraman, the event that would encourage a larger exposure to equity is finding the cure for the Covid-19 virus.
Watch | The IIFL Think Tank In Conversation With BloombergQuint