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Top performing asset classes of Samvat 2075: The award goes to…

Mutual funds offered some solace in an otherwise weak environment.

, ETMarkets.com|
Updated: Oct 24, 2019, 03.38 PM IST
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Midcap and smallcap-oriented equity fund schemes offered 1-2 per cent returns against negative returns by the broader stock market.
NEW DELHI: Equity investments failed investors in Samvat 2075, even as bullion and select debt instruments emerged surprise winners in a year that saw India’s GDP growth slipping to multi-year low.

Those investing in agri-commodites (except for soyabean) rued their decisions. Base metals as a pack flopped, though nickel and lead stood apart to deliver handsome returns.

In realty, rental yields from residential properties stayed in a range as supplies remained high, but commercial properties in major cities offered decent returns.

Investors who sought comfort in bank fixed deposits complained of falling interest rates. But risk takers, who dared to take exposure to troubled corporate bonds, ended up burning fingers.

Mutual funds offered some solace in an otherwise weak environment.

Here is a performance analysis for various asset classes as the Hindu accounting calendar draws to a close on October 26.

Equities: A tale of two halves
The divergence was at its best in equities, where largecaps – especially the top 10 stocks – anchored 11-12 per cent returns on Nifty50 and Sensex. For most investors, it was a very painful year to navigate.

Three out of every four BSE-listed stocks declined for the year. Top 10 Sensex performers added Rs 9 lakh crore to investor wealth, while the rest 2,450-odd stocks lost Rs 2 lakh crore in market value.

Even in the case of largecaps, only 12 out of 30 Sensex stocks are on course to end the year with over 10 per cent return. Midcap and smallcap indices are ending up in the red for the second Samvat year a row.

In the ETMarkets.com Samvat Survey, most analysts projected Sensex and Nifty to rise 7-13 per cent in the new Samvat year. For Sensex, the targets range from 42,000 to 44,000, while most see Nifty50 to easily top 13,000 by next Diwali. The participants expect the new Samvat year to see an outperformance by midcaps and smallcaps over their largecap peers.

50 stock picks from top brokerages for Samvat 2076

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Samvat 2075

23 Oct, 2019
Samvat 2075 comes to an end, and a new Samvat kicks off on Diwali this Sunday, October 27. In the Samvat year gone by, Nifty generated 10.8% return and Sensex 9.8%, but that growth was limited to a handful of stocks. This is why most investors’ equity portfolio bled to make Samvat 2075 a forgettable year. Samvat 2075 was tough for investors, as stock performance remained concentrated in specific pockets.
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Mutual funds: Debt fares better than equity
While multicap funds performed well in the equity category in line with the benchmark indices, select debt funds performed pretty well through the Samvat year.

“It has not been a good year for equity-linked funds. But their performance was in no way worse than the market. When it comes to debt, there was a clear divergence. The category of funds that plays on duration – such as dynamic bonds, medium-to-long duration bonds and GILT funds – had a fantastic year as yields fell and bond prices rose,” said Vidhya Bala, co-founder at Redwood Research.

Gilt category of debt offered 14 per cent return in last one year. The largecap and multicap categories offered 12-13 per cent return. Hybrid bond funds offered 7-9 per cent returns.

Midcap and smallcap-oriented equity fund schemes offered 1-2 per cent returns against negative returns by the broader stock market.

“There were also a few fund categories among debt funds that got impacted by the credit crunch. International funds fared reasonably well. Going into the new Samvat year, quality corporate debt looks attractive given the falling interest rate scenario. One should not get spooked by what happened in last one year. Equity investors, who have the stomach to weather volatility, can take exposure to multicap or diversified funds,” she said.

Gold, silver shone; Nickel on Cloud 9
Higher prices might be pinching prospective gold buyers this Diwali. But those holding on to the precious metal are in for a joyride. Gold prices rose 20 per cent (MCX spot) to Rs 38,000 level this Samvat. Other than safe haven demand, the yellow metal also got support from a depreciating rupee, which fell the tune of 1.4 per cent against the dollar.

“We expect the positive momentum in gold to continue further, but the pace of the price rise could get restricted as uncertainties related to the trade war are waning. The slowdown in major economies is likely to keep central banks dovish for an extended period. That should support gold prices,” said Navneet Damani, VP- Commodity Research at MOFSL.

“Easing of trade war tensions could lead to some correction in prices, but as long as gold holds Rs 35,500 level, we would remain bullish and expect it move higher to test the previous high of Rs 39,500 followed by Rs 41,500 levels by next Diwali," he said.

Silver, which is used in electrical components and in religious functions and weddings, jumped 19 per cent to Rs 45,534 per kg.

Base metals as a pack had mixed performance. Nickel jumped 42 per cent to Rs 1,213 a kg from Rs 851.70 on November 7, 2018. Lead gained 17 per cent to Rs 162.15 per kg. Zinc prices rose a mere 2 per cent to Rs 188.10 per kg. Aluminium and copper prices fell 2.4 per cent and 1.1 per cent, respectively.

Metals

Globally, while prices of palladium have jumped 56.2 per cent during the Samvat to $1,753 an ounce from $1,122 per ounce while the price of platinum rose a mere 2 per cent to $895 an ounce from $876 ounce.

Agri-commodities: Soyabean shone in a gloomy year
Two major oil seeds, soybean and mustard, posted decent gains this Samvat, thanks to a hike in support prices.

“Increasing oil meal consumption demand from feed manufacturing industry and the government’s aim to achieve self-sufficiency in edible oil also supported oil seed prices during the year,” said Ravindra Rao, Vice-President and Head of Commodity Research at Kotak Securities.

In case of castor seed, prospects of better production and bleak export demand, primarily due to a slowdown in the Chinese economy, dragged prices by over 20 per cent. In cotton, despite lower production in India last year, the trade impasse between the US and China and limited demand from the textile industry dented cotton prices by nearly 14 per cent.

Going ahead, analysts prefer soyabean and palm oil. A sharp drop in output this year due to crop loss in Madhya Pradesh and Rajasthan amid torrential rains might keep soybean prices firm after the peak arrival season concludes in November. Hopes that the US and China might not resolve their trade spat anytime soon will also keep soybean prices elevated this year.

"Besides, the government is expected to continue with their steep rise in MSP next season. Considering all the aspects, we expect soybean prices, which traded near Rs 3,700 per quintal, will provide good returns by next Diwali,” said Rao.

Meanwhile, high production cycle of palm oil is expected to decelerate in the world’s second-largest palm oil-producing nation, Malaysia. Moreover, Indonesia’s plan to implement B30 mandate by early 2020 which will also increase country’s domestic consumption of palm oil considerably . “That should drag the stock pile of palm oil and lower the possibility of a price correction in palm oil next year," he said.

MCX snip 1

Real estate: Commercials offer return, residential tepid
Residential property failed to offer any respite to investors, as prices remained under pressure through the year. Foreign brokerage UBS said affordability in residential realty today is highest in 15 years (low prices), but sales have weakened in the last seven years, more so post-NBFC crisis.

“High mortgage real interest rates, even more so in the context of low rental yields and stagnant property prices, are clearly big deterrents for households' demand for property. The broader anti-corruption agenda over the last few years has had an impact. A negative feedback loop is also at play,” it said.

The case was different in office market.

“The international business part of the office market, which comprises technology and outsource businesses and accounts for 55-60 per cent of the total office market, is showing good momentum. However, the India-facing business is a little skeptical, with many companies slowing down for various reasons,” said Viral Desai, National Director – Occupier Solutions, Knight Frank India.

He said the international part of the business should remain robust for next six months, but progress in the India-facing business needs to be monitored. Rental yields at present are in the 8-8.25 per cent range.

Desai see no change in outlook for next six months, as capital remains limited and institutional buyers will look to maintain the current yield.

In the case of commercial properties, average rental values across seven cities jumped 10 per cent YoY between January and June, Knight Frank data showed. Ahmedabad experienced the maximum YoY rental growth at 14.3 per cent, while Bengaluru and Hyderabad clocked growth rates of 13.5 per cent and 11.3 per cent YoY, respectively.

Mumbai and Chennai saw rental growth at a respectable 7.5 per cent and 3.5 per cent YoY, while Kolkata rentals grew at a barely positive 0.6 per cent. Five out of eight key markets saw double-digit rental growth between January and June, Knight Frank said.


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