25 Sep 2018, 09:47 — 5 min read
Indian Markets are growing at a reasonable pace over the last couple of years. India has gained from the benefits of good governance policies, ease of business, digital initiatives etc. There have been a lot of examples of this like the direct benefit transfer of subsidies, rural electrification and GST which are likely to deliver greater revenues on account of more compliance.
What is the road ahead for different asset classes?
Large cap continues to be the beneficiary of multiple sources such as shift from unorganised to organised. Monsoon has been near normal and hence rural recovery seems more likely.
Large caps market technicals look good from an investing point of view. Markets are likely to see a range of 11500-12000 in Nifty before elections due next year. RBI has given a dividend of INR 40,000 crores to the government which may help increase the infrastructure spend. Nifty 100 is likely to create the next round of returns for investors.
Last couple of years, mid/small cap as a category has been recipients of a turnaround situation. However stocks in this category appear to be fully valued and hence even a small miss in earnings is likely to create disproportionate volatility and price correction. Both the small/midcap indices are below their 200 day moving average and hence appear to be at a decent price point to enter.
Our view is that large/multi-cap oriented portfolios are likely to provide better risk adjusted returns going forward with a 3 year time horizon. Concentrated portfolios through the PMS route with a good track record are likely to provide higher returns going forward.
Interest rates have already raised a couple of times this year. The US president’s policies to build growth appear to be working. Two more hikes are likely going forward both overseas as well as in India. Our stance is that “leveraged products need to be avoided” at this stage in the cycle, Eg: direct exposure to futures.
G-sec (Government Securities) trading can be an interesting opportunity going forward.
Indian currency has largely been unaffected vis-à-vis the US dollar in the last couple of years. Going forward if oil goes above $100/barrel, one is likely to see a change in the fiscal calculations and hence currency may also depreciate rapidly if it happens. As of now rupee seems to be in an oversold zone and is likely to recover.
The inventory in most major Indian metropolitan cities is at least 3 years away in terms of the oversupply. Affordable housing and commercial are likely to pick up gradually. Luxury real estate may not see a quick revival for some period of time.
The key advantage of the alternate funds is relatively greater consistency and lesser volatility.
Real Estate Fund: A more attractive structure which has emerged over the years is the real estate fund. With the introduction of RERA (Real Estate Regulation Act), the rules have been tightened and as per discussions with developers who have delivered their projects it is an extreme level of compliance. Our belief is that with a strong compliance system investors' safety is enhanced and hence the investor experience is likely to be in line with expectation.
Hedge Funds: Through the Alternate Investment Fund route Hedge funds is a growing opportunity for investors. One could look at 12-14% on a post tax basis from these kind of instruments.
India remains good for the next 10-15 years vis-à-vis other emerging markets on account of stronger structural positives like GST, demographic dividend which are likely to give the government higher spending power before the private investment picks up.
Think long term, add gradually.
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Disclaimer - Investment Risks: All investment instruments mentioned in this article, including real estate, is speculative in nature and involves substantial risk of loss. Readers are advised to fully understand all risks associated with any kind of investing they choose to do. The views, opinions, recommendations & estimated expected returns from several investment instruments & asset classes expressed in this article are those of the author and do not reflect the views, official policy or position of GlobalLinker.
Posted byAnirudh Anand Gupta
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7 Sep 2021, 11:00