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Stock Analysis, IPO, Mutual Funds, Bonds & More survey: Cautious on equity, hot on debt & gold, cold on realty

All money managers seem to be giving more weight to debt for the coming year.

Updated: Nov 05, 2018, 11.22 AM IST
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At the dawn of a new Samvat year, 2075, analysts are not giving much weightage to equity for portfolio allocation.
Samvat 2074, the Hindu accounting calendar that ends on Diwali, was a tough year for Indian stock investors. While the first few months of the year saw the market soar to unbelievable valuations, it witnessed a significant correction and came down sharply over the past few months.

At the dawn of a new Samvat year, 2075, analysts are not giving much weightage to equity for portfolio allocation. They are advising investors to go for a diversified portfolio with 40-50 per cent equity exposure. That’s the view of 20 CIOs and research heads from top broking houses, mutual funds, life insurers and private equity funds.

So, if you have to invest Rs 1 lakh this Diwali, Rs 40,000-Rs 50,000 should go into equities, and the rest into gold and fixed income.

The stocks correction during the year gone by was more acute in midcaps and smallcaps, mainly due to Sebi’s reclassification of mutual fund schemes and GSM/ASM circular and a change in equity taxation. In addition, a liquidity crisis in the NBFC space exposed by the IL&FS default caused quite a bit of turmoil.

While the BSE Sensex is still up about 6 per cent since last Diwali, the BSE Midcap and Smallcap indices are down 9 per cent and 17 per cent, respectively. Gold, on the other hand, has risen 5 per cent, while silver is down 3 per cent.

“Have a conservative approach to equities and the exposure for an average risk-averse investor should be in the 40 to 60 per cent range (including direct and mutual fund investments),” says Vinod Nair, Head of Research, Geojit Financial Services. Rest of the money can be distributed across short-term debt and gold as per one’s age and risk-taking ability.

Prasanna Pathak, Fund Manager at Taurus Mutual Fund, said after providing for contingencies, 60 per cent of the incremental savings should go into equities (through a mix of diversified equity and balanced mutual funds) and 40 per cent to various fixed-income instruments. That should work well for an average risk-taking investor.

Interestingly, none recommended real estate as an investment. Some said keeping some liquid cash could help tap upcoming opportunities in the market.

All money managers seem to be giving more weightage to debt for the coming year than last year.

Jagannadham Thunuguntla, Senior VP and Head of Research (Wealth), Centrum Broking, said 30-35 per cent of a portfolio should go into high quality debt, which has no exposure to risky sectors like real estate and infrastructure.

As for equity, he says 50 per cent the total equity exposure should be in largecaps, preferably non-lending businesses. Thunuguntla advises you to keep 10 per cent of your savings in liquid assets to be able to make the most out of the opportunities that the stock market may throw up. Another 5 per cent can go into gold.

India’s macroeconomic indicators weakened quite a bit midway through the financial year amid rising crude oil prices, weakening of the rupee against dollar, fear of more rate hikes by RBI and the US Fed and concerns over global trade war.

The BSE Sensex traded just shy of the 35,000 mark on Monday, way below its peak of 38,989 hit on August 29.

Sahil Kapoor, Chief Market Strategist at Edelweiss Investment Research, said the stock market has some medium-term troubles ahead, including the state assembly elections over November-December and the general elections in April-May. “We expect Nifty to look up once the current downtrend ends and the market finds a bottom and touch 11,500 by next Diwali.”

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