WF: Where do you think markets are headed? What are you advising your clients to do in this correction?

Shibu: There are two parts to this : clients who have already invested and new investments that are being made now.

For clients who have invested some time ago, we believe that we have done some asset allocation or understood why the investments are being done and for what time horizons. Those clients are quiet comfortable retaining their holdings in this correction because they have seen in the last one year that we fell from 21000 all the way to 8000 and have bounced back sharply from there. It reinforces the belief that markets bounce back after a crash in 1-2 years. So, they are comfortable staying invested.

I think the question is more important in terms of what people do with the fresh money. Here, if we are talking about investors who have got appetite for equity but are nervous, to them we are clearly saying that, please go ahead and invest and don't try to time the market. Whether you invest at 17000, 18000 or 16000, on a 3 year perspective, it will not make a much of a difference.

Back in Jan 2008, we were at 21,000. Now, even if we come back to the same 21,000 level by end of 2011 - which is 2 years from now, clients who buy today at around 16,000 - 16,500 levels will still make a very healthy 16-18% annualized return. If you keep waiting for markets to come down to say 13,000 levels, you might keep waiting and watching it go back to 20,000 and then come back in a correction to 18,000 - which is higher than where we are today.

WF: Are clients buying this logic or are they still hesitating?

Shibu: I think 70- 80% of my investors are buying this logic, they have not actually got out of the equities in the last crash. I have been able to hold them back in equity. Even for fresh investments, most of my clients are accepting this logic. We are talking about clients who make bulk investments.

There are other investors who are in SIP, STP mode - for them its okay, They just keep continuing that.

WF: As an advisor, do your prefer an STP mode or would you rather go for lumpsum investments?

Shibu: I think it depends on the investors frankly. We are bullish on markets. For clients who have the risk appetite, they might find that STPs don't work in a rising market. It is better to go for lumpsum investments for them.

But clients who are a little more reserved, little more cautious, would prefer the STP or SIP route. The problem with STP is that volatile phases are so short. We saw 1500 points down for example in less than a month. There will be very few STP instalments that will be able to capture these short bursts down. Bulk of the instalments will anyway go in at higher levels. I therefore think that anyone who has a 2-3 year outlook should go ahead and invest.

WF: Do you see clients who invested in 2006-2007, whose investments have now come back to cost, feeling nervous about this correction and wanting to redeem?

Shibu: The best thing that has happened for all of us advisors is the market crashing to 8000 levels!

Clients who have seen the crash and then the sharp recovery have mentally set a new benchmark for what volatility is all about. If this crash had not happened, right now, I would be flooded with client questions : "kya 15,000 ho jayega (will the market reach 15,000) or kya 14,000 ho jayega?" And we would be hard pressed to answer these queries. Now, after the crash and rebound, clients ask me "8000 to nahin hoga na phirse(it won't go back to 8000, will it)?"

Clients have recaliberated their tolerance levels of market volatility. They are no longer worried about 10% and 20% dips - they have just seen and lived through something far more scary - and have come out of it in good shape. I frankly think this big crash to 8000 is the best thing that happened for clients and advisors.

WF: Which are your favourite equity funds which you are comfortable recommending to you clients?

Shibu: I look for a solid track record - not just on a one year basis - but longer term. My top equity funds will include DSP Blackrock Top 100, HDFC Top 200 and Reliance Growth. I am now also considering a couple of funds from IDFC - Imperial and Premier.

WF: Do you recommend gold funds to your clients?

Shibu: As far as the gold is concerned, we believe that gold should constitute upto 15% of your portfolio - purely from an asset allocation perspective. If you ask me what is the medium or short term view, I actually have no view on gold, because it is so volatile, medium to short term I don't have a view. But long term I think the demand supply gap itself will sustain gold prices with the positive upward bias and actually if you see the factors everyone are talking about output of gold mines are dropping and new mines are hard to come by and dollar uncertainty, gold will be a good store of value. On an inflation adjusted basis, gold can rise upto US$ 2300 - based on its last 1980 bull market top.