November 19, 2019
16.5.2017
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” – Warren Buffett
Sensex have not only breached the 30,000 barrier but have sustained over it for quite some time now and is scaling new highs. 10 year’s G-Sec yields after gaining over 30 basis points in April have started easing to lower levels. Gold too has been steady.
Wholesale price inflation and consumer price inflation has come down in April to 3.85% and 2.99% in April 2017. While factory output rose by about 5%, the IIP slipped to 2.7%. Skymet and IMD have given contradictory forecast about monsoon. Corporate earnings had been a mixed bag barely touching double digit mark. IMF has forecasted India to grow at 7.2% for 2017-18. Experts also believe that GST would add another 150-200 basis points to GDP growth in India.
Let us ponder over what we should do as an investor in such environment sending mixed signals.
Our view
Equity: We believe that equity market may continue to rise by another 2-5% and then take a breather. From there markets may remain range-bound for next 3-5 months before moving further. One might look at booking profits if sensex crosses 31000 in a phased manner and invest if market fall by over 8% from its peak. If you have Lumpsum to invest then stagger your investments over 6-9 month’s period. Use STP method for this purpose. Those who are doing SIPs need not bother about the valuations or levels of sensex and just continue with their SIPs. SIPs will take care of this volatility by itself.
Debt: RBI may continue with neutral stance in its June review of monetary policy. We maintain that over next 3-4 years RBI will bring down Repo rates by over 150 basis points. In the interim hike in the same is not ruled out if inflation rises due deficit monsoon or growth in GDP or government spending or any other factor. Invest in accrual based credit opportunities funds for 1.5 to 3 years period. Buy tax free bonds to earn pre-tax current yield of over 9%.
Gold: Ideally one should have 5-10% of total investments into gold and there is no better option than Sovereign Gold Bonds to invest in gold. The next best alternative is to invest through mutual funds. Prevailing tension in gulf region, escalating conflicts between North Korea & USA, terrorism that have spread across globe may create panic at any time. And that is the time when Gold peaks and stabilizes your portfolio returns. It also comes handy if you need funds during such periods.
Real Estate: There seems no respite in near future. We feel government’s push to affordable housing and infrastructure will push demand for other types of housing units in 3 to 5 years period. We at InvestmentMitra maintain that real estate is a location specific subject and environment of one place should not be generalized for other places.
Art & Sculpture: Those who have their investment portfolio of over five crores should consider investing in paintings and sculptures of upcoming artists who have gained acceptance in the market. These investments not only décor your house but also at times turns out to be multibagger or even goldmine.
Derivative Strategies: Some derivative strategies like arbitrage offer safe but decent returns. Many experienced trader trade in various other derivative strategies that offer very high returns but at the same time they are exposed to very high risk as well. So do your homework with great care before taking a plunge into such strategies or handing over your money to such a player. Risk management practices are most crucial factor in stocks/derivative trading.
Please get in touch with your financial advisor and discuss if you need to rebalance your portfolio or need to alter your investment strategy in current scenario. You may also write to us on ajay@investmentmitra.com or SMS/Whatsapp/Telegram on 9958447700.
Happy Investing!