Summary
Nifty50 Earnings and Valuations
- Nifty50’s trailing valuations are in fair value territory, while forward P/E multiples indicate expensive valuations.
- Price to Book (P/B) for Nifty 50 has moved into expensive territory, currently at 3.7 compared to a long-term average of 3.
- The tactical indicator, which feeds into UTI’s multi-asset fund asset allocation model, is now in the orange zone, favoring fixed income over equities.
Investment Approach
- BAF, Multi asset Allocation and Equity savings funds can be considered for lump sum while STP over 6-12 months preferred with bias towards large caps.
- Sector and thematic ideas: Banking and Financial Services and Healthcare sector and can look at STP in the Innovation Fund.
UTI Multi-Asset Allocation Fund
- UTI Multi-Asset Allocation Fund provides access to three different asset classes with negative or low correlation to each other: Equity, Fixed Income, and Gold.
- Equity offers long-term wealth creation but is volatile in the short term, Fixed Income generates stable returns with lower volatility, and Gold has a negative correlation to Equity and provides protection during turbulent market environments.
- Historically, Equity markets correct 15-20% every 3-4 years, and Gold and Fixed Income deliver positive returns during such corrections.Combining different asset classes with negative or low correlation (like equity, fixed income, and gold) can generate stable returns over time.A portfolio of 65% equity, 25% fixed income, and 10% gold has historically delivered similar returns to equity but with lower volatility.
- UTI multi-asset allocation fund dynamically adjusts asset allocation based on relative valuations and gold-to-equity ratio.
