In this note to investors and advisors, Aashish tackles the burning issue of equity fund NAVs not reflecting market indices’ sharp upmove. What should you do now? Here are the key takeaways from his note:

• If it ain’t broken, don’t fix it: Don’t rush to shuffle your equity fund portfolio due to near term underperformance unless you are convinced there is long term damage in store by remaining invested.
• When quality performed in the previous 2 years, alpha generation was very strong. With markets rotating into poorer quality stocks which are playing catch up, high quality stocks are seeing a time correction, even as their earnings continues to grow, making them a lot more valuable compared to stocks that are at the epicenter of this market upmove.
• Stock picking works best when markets are not trending furiously either upwards or downwards. In a market where the benchmark itself moves up 40%, outperformance is always going to be a challenge.
• Benchmark valuations may be high, but fund portfolios are actually looking a lot more valuable today, post the time correction, which should give confidence that they will be a lot more resilient even if benchmarks witness a correction after this steep rise.

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