I hope you all are safe and in good health!

In the month of March I had written three consecutive mails emphasizing not to panic, follow asset allocation, and increase allocation to equity depending on your asset allocation framework.

Sentiment has quickly moved from despair to hope in 3 months. The global rally in equities surprised everyone. it is the result of a massive stimulus package announced by global central banks, particularly the US central bank. I had utilized the fall to add equities for some of you based on your individual profiles.

Barring 15-20 stocks, the rest of the market is fairly valued. Continue with SIP, STP’s in equity and lump sum in asset allocation funds.

In the recent bounce, the best performing segment of the market is penny stocks. Most of the retail investors in the lockdown period opened demat accounts and started trading predominantly in these stocks, which are not fit for investment. So beware of it.

Going ahead economic growth will be uneven and difficult to forecast. While equity markets can be supported by liquidity in the near term, they do not reflect the real economy to the full extent.

Rising markets does not necessarily mean the economy is booming and falling markets does not mean the economy is in bad shape. Ultimately it is fundamentals which will determine the medium to long term direction of the markets. One needs to stay the course ignoring the short term volatility.

One should not take investment decisions solely on price action. And more importantly do not get carried away with rising and falling markets. Stick to your asset allocation.

Bank FD rates are at all time low and are unlikely to improve over medium term. The post tax return on a FD for a higher tax bracket investor has fallen to 4% plus.

As an alternative debt funds are better placed.

For Sr. citizens who do not have tax liability and fall in 10% slab their first choice should be Post office sr. citizen scheme. For rest debt funds are better placed.

Do let me know in case of any further information.