It’s cherry-picking time for investors in the Indian market in the New Year, according to UAE-based investment advisers.
Irrespective of the vagaries of the political climate in the country, investors should concentrate on creating wealth through systematic investments, said KV Shamsudheen, director, Burjeel Geojit Securities, Dubai, who is an ardent proponent of SIPs.
“The New Year resolution of every NRI should be to save more for the future. I suggest at least 30% of your income should be kept aside for productive investments to secure a financially comfortable retired life. SIPs are the best option. Never mind the political situation in the country, keep invested, and scale up SIPs. That would be a smart investment move.”
Binoo Nayyar, chief financial officer, TrendRiser Securities, Dubai, said the market will remain volatile in the run-up to the general elections and beyond and it is the time for cherry-picking. SIP investors are advised to continue without breaking. All asset management companies (AMCs) have sold stocks, and a few are recasting their portfolios selectively.
Almost all public sector bank scrips are at attractive valuations. Like other fund advisers, Nayyar is bullish on banks and expects well-managed banks to do well in the year ahead. The advisers are betting on public sector banks as the credit crunch is unlikely to continue and banks have recognised most bad assets in the sector.
“I would advise investors to build a portfolio consisting of mid-cap and small-cap companies, select blue chips, and debt instruments such as government securities. NRIs can invest in government bonds, and long-term securities issued by the government of India. Government securities give returns of about 7% to 8%,” Nayyar said.
All bets on SIPs
Dubai-based investment advisers subscribe to the highly optimistic view of India’s celebrity investor Rakesh Jhunjhunwala that SIPs of mutual funds should be part of every investor’s finances, saying that Indian equity market would create more wealth in the year ahead.
He, however, warned SIP investors not to try and be over smart and greedy. “Don’t expect more than 12% to 13% per cent returns,” he said.
Roy advises a diversified portfolio for NRI investors. Unlike in the past, NRI investors have exposure to global markets.
“In a diversified portfolio, we would advise emerging markets, the US and European stocks as well as bonds, which have seen an inverted yield curve, and even a small portion of gold,” Roy said.
There is buying interest in emerging markets and the trend is expected to continue in the New Year.
Indian markets will witness a bull phase in the short term, particularly, the infrastructure cycle is bullish.
Monthly SIP flows are expected to rise in India. Agreeing with Jhunjunwala, Subhasish Roy, authorised consultant with Nexus Insurance Brokers, Dubai, said SIP investors can expect similar double-digit returns.
However, Roy does not agree with Nayyar on the over-stress on mid-caps for the simple reason that mid-cap scrips trail behind large-caps as far as valuation is concerned. “Just chase quality stocks. As it is, the excitement about mid-caps is waning”, he said.
“When Jhunjunwala, who is considered India’s Warren Buffet, says market volatility is there for some more time to come, it’s time to take note and act accordingly,” said Partha Sarathy, senior partner with Morison Menon, auditors and business advisors, arguing that nervousness breeds volatility.
Jojo James, chief executive officer, Fosbury Wealth Managers, and partner of Tamim Chartered Accountants, UAE, holds on to his earlier view of continuing volatility at least till a new government is installed in six months, and probably beyond. In such an eventuality, he reiterates his advice to adopt a reallocation strategy by shifting funds to safer avenues.
Those who have invested lump sum in equities or equity mutual funds will see their investment value depreciated in the coming three-four months.
“My advice is to shift the investments to different choices like migrating to debt funds or switch to US-focused INR funds which have shown good performance in the past one year,” said James, who believes in the resilience power of the Indian economy.
Going by past experience, political volatility will have only limited impact on the Indian markets as evidenced by the recent uptrend in the market in the wake of election setback to prime minister Narendra Modi’s Bharatiya Janata Party.
“Investors should take a cue from this. For the longer term, India-focused instruments are the best in view of the resilience power of the Indian economy. The shift in investment avenues is suggested only to protect the wealth for now. This need not be a long-term strategy,” James said.
