In the current scenario, should I be investing in equity and avoid debt? Also, is it a good idea to invest in NPS only for additional tax benefit? Further, can I change the allocation of NPS to purely debt?
To answer your first question, you should be investing in equity only if this is your long-term money. The state of the market should not drive your investment decisions. If you are investing for a long time frame, you should be dominantly investing in equity. Also, a small part of your money should always be in fixed income. It will provide stability to your portfolio and enable the rebalancing opportunity for your asset allocation plan. When your equity gains substantially, book some profit and put it in fixed income. And put your asset allocation back to the normal. Likewise, in the month of March when equity tanked, you would have moved money from fixed-income to equity. So, it entirely depends on your investment time frame. If this is your long-term money, then carry on with equity.
Coming to the question related to NPS, yes, it is a good idea to invest in NPS. I like it for a funny reason. When you invest in NPS, you can't take your money out for a long period of time, till your retirement. That actually enforces discipline which many of us lack. When we have access to our investments, we often end up consuming them much before the purpose they are actually intended for, not because of an emergency but simply because they are accessible. So, in that sense, it enforces discipline. And it also gets you an additional tax benefit. Do invest in it. NPS allows you to allocate completely (100 per cent) in government securities or corporate debt. It is also possible to get an equity exposure of up to 75 per cent now.