It is best recommended for you to inquire with your fund house about the respective commissions.
2. There are speculations that the US dollar will collapse and stock markets globally will bottom out to the level 20 years back. When the sustenance of the Sensex at 16,000 is questionable, it is difficult to expect any rise. All AMCs depict a rosy picture, because they have to run their business. In this scenario, is it advisable to invest in equity linked mutual funds? –
Shailesh Raval
Trying to predict the market is a futile exercise, although one can try to make some intelligent guesswork.
Broadly we can say that if the underlying businesses do well, then markets in the long run will do well. Between 1980 to 2009 the markets have given returns of approximately 20% annually. During this period there were many instances where it was felt that markets would go to levels that was set 20 years ago. Even though there were dangerous declines sometimes, the long term direction was still positive.
Today, many Indian businesses are likely to do well for the following reasons:
1) Younger working population- hence more consumption
2) Higher pay packets
3) High consumption tendencies
4) Lower cost of borrowing, so buying a house and other assets on credit are not as risky as earlier
5) FDI money is coming into India and is being invested in the real economy, thus creating jobs
6) Higher Government spending
7) Rural wealth is generally good, with mechanisms in place to support the rural economy even if the rains are poor
We can go on with many other reasons. But the key point to note is that India is growing and therefore companies will do well, and profit growth will be reasonably good. In such a scenario the stock markets are likely to do well too.
However there will be periods of uncertainty due to dollar crash, inflation, high interest rates etc. During such times the markets will perform poorly. Since the timing of this poor performance cannot be timed to perfection, it is better to stay invested in equities and allow it to grow over long periods of time. If you are more risk averse, and invest only in diversified equity funds, it is best to stay away from thematic funds.
Just for arguments sake if the markets go back to levels that was 20 years ago, it can generate a very interesting investing opportunity as the markets would then be at approximately 778 and if the earnings are flat-ish at 2009 levels then the PE of the market would be lesser than 1 (considering an estimated Sensex EPS of 825 for 2010), creating an extraordinary buying opportunity.
Though going to these levels is not impossible, it is a remote possibility and thus trying to predict this event is futile.
Disclaimer: The responses mentioned here are strictly for illustration purposes, and are not to be considered or implemented as recommendations.