Let your mutual fund manager change the portfolio to meet new realities

By I V Subramaniam

The Sensex declined by 8.2% on Thursday and by 20.5% in the current year. The decline in share prices has resulted in trailing 12-month PE ratios declining from the peak of around 28x to 20x currently. MTD FII have sold to the extent of $3.1 billion and the local mutual fund buying of $524 million, could be no match for it.

The inflated equity prices without earnings growth was at risk anyways and the Corona virus plus the announcement of takeover of Yes Bank was probably the last straw that broke the camel’s back. While one has to be careful from getting infected by the virus, the panic in the market could also be an opportunity.

We are using the opportunity to reshuffle the portfolio towards companies that can sustain the slowdown in the economy and a changed macroeconomic scenario where rupee could slip and inflation could be higher. In cautious markets we see opportunities and are deploying cash.


The silver lining is that the 10% higher than normal rainfall last monsoon looks to have resulted in a record winter harvest. This could act as a cushion to the fall in economic growth.

The normal operations of research in companies continue. Precautionary measures taken by companies in India to prevent spread of COVID 19, will impact our ability to go and physically meet companies or visit factories, but through con calls we are able to reach out to companies, speak with them and assess the risk they are facing or the opportunities that are coming their way. We have allowed our staff to work from home or to visit our satellite office in the suburbs rather than travelling to our main office by undertaking a journey in the crowded trains or the crowded streets.

Our advice to investors is to stay invested and allow the fund manager to change the portfolio to meet the new realities.

The world has indeed changed.

(I V Subramaniam is Director of Quantum Mutual Fund)