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Where to invest Rs 1 lakh when 86% of the stocks are down in the dumps

More than 85 per cent of stocks on NSE have eroded investors’ wealth since January 2018.

Updated: Jun 20, 2019, 12.29 PM IST
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“The 100 minus age thumb rule always works,” says Mustafa Nadeem, CEO, Epic Research.
Every major correction in the stock market throws up opportunities for investors. BSE benchmark Sensex is down 3 per cent from its all-time high of 40,312, scaled on June 4, 2019, while BSE Midcap and Smallcap indices are down up to 30 per cent from their respective high points hit in January, 2018.

More than 85 per cent of stocks on the National Stock Exchange (NSE) have eroded investors’ wealth since January 2018.

This year, the market is trading widely polarised: the best performer of the Nifty500 index, Aavas Financiers, is up 74 per cent year to date, while the worst performer, Reliance Communications, is down 90 per cent.

That being the case, it would be tough to decide if you had Rs 1 lakh to invest today. Beyond equities, NCDs and debt funds are looking risky but yields on select debentures have risen sharply, while gold has just had a good run and is in pause mode though analysts say it is only a matter of time before it starts the next big leap.

“If you have to invest the corpus for the near term (say, three years), then the asset allocation can be 65 per cent in debt, 30 per cent in equities, 5 per cent in gold. But if the investment is for the long term (over 3 years), then the asset mix can be 60 per cent in equities and 40 per cent in debt,” said Jharna Agarwal, Head of Products, Anand Rathi Preferred.

Be it equity, debt, real estate and commodities, asset classes go through their own return cycles and bull or bear phases. That is why it is of paramount importance to maintain proper asset allocation and have a diversified portfolio.

Meanwhile, the younger one is, the better placed she is to go for a risky bet. “A young investor with no financial responsibilities, no debt and low on capital can pour 70-80 per cent of the corpus in equities (smallcaps and midcaps), 10-20 per cent in gold and the remaining in debt instruments,” says Anshul Saigal, Portfolio Manager & Head- PMS, Kotak Mahindra AMC.

Besides age, it also depends on other factors such as financial status, leverage and time horizon of investment, he said.

Each asset class has different risk-reward matrix. For instance, bank fixed deposit is for capital preservation where the ultimate goal is to maintain its real value, ensuring that the return matches inflation. Whereas an asset class like equities is for increasing the real value by earning returns much above the rate of inflation. But that is possible if one is ready to take risks.

Analysts say one should invest in complementary instruments to build an all-weather portfolio.

“The 100 minus age thumb rule always works,” says Mustafa Nadeem, CEO, Epic Research.

That rule says what portion of a corpus should go into equity should be calculated by deducting one’s age from the number 100. And, 60 per cent of remaining amount should go into bond or debt funds and the rest to commodities.

For Nadeem, Titan and SBI should be a part of any investor’s equity portfolio for next five years.

Amit Gupta, Co-Founder and CEO, Trading Bells, recommended Pidilite Industries, Havells, Axis Bank and PVR for next five years.

This Monday, its 10th birthday, business news channel ETNOW invited 10 renowned stock pickers from Dalal Street – including Basant Maheshwari, Porinju Veliyath, Vijay Kedia, Sandip Sabharwal and Manish Sonthalia – to build a Power Portfolio of 10 stocks for next 10 years.

They picked Titan, Britannia, Tata Global Beverages, Repro India, Britannia and DCB Bank, Edelweiss Financial Services, HDFC Life and Syngene for long-term play.
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