Investors should exercise caution in the current market environment, particularly by avoiding excessive leverage and keeping some cash available to take advantage of opportunities, according to Raamdeo Agrawal, Chairman and Co-founder, Motilal Oswal Financial Services.
Speaking in an interview with NDTV Profit, Agrawal said investors should be particularly careful about speculation when uncertainty in the market is high. His preferred approach is to remain unleveraged and, for investors who are comfortable doing so, maintain a portion of their portfolio in cash to grab on the opportunities during the times of correction.
“The best way to cut your risk in the market is to be unlevered,” said the veteran investor.
He added that investors could consider keeping 10%, 20% or even 30% of their money in cash, depending on their risk appetite.
According to Agrawal, having cash provides investors with the flexibility to deploy capital when stocks or the broader market correct.
“Let the whole world burn and you will be fine,” he said, highlighting the importance of avoiding forced selling during periods of market stress.
However, Agrawal does not believe investors should completely stay away from equities. Instead, he sees periods of uncertainty as potential opportunities to identify fundamentally strong businesses at better valuations.
Speaking on the outlook for Indian stock market, Agrawal said the domestic economy and corporate earnings remain on relatively strong footing. However, rising global bond yields, elevated crude oil prices and geopolitical uncertainties are creating risks for markets.
He pointed to corporate earnings growth of around 15% as a positive for Indian equities and said the domestic economy remains resilient. According to him, the bigger concerns are global factors such as crude oil prices, spike in bond yields and geopolitical tensions.
For long-term investors, Agrawal's message is therefore not about predicting the next market move. It is about maintaining enough financial flexibility to withstand volatility and having the conviction and patience to buy when opportunities emerge.
ALSO READ: HDFC Bank Leadership Change To Tata Sons Listing: What Raamdeo Agrawal Has To Say?
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.