Debojyoti Ghosh | TNN
It was a roller coaster ride for the Indian equity market this year with the sensex swinging from a low of 12,000 to a high of 21,000. But investors are a confused lot on what to look for in 2008 as far as investment decisions and building portfolios are concerned. That means, the party is not yet over for professional wealth managers.
“The India growth story is intact and will remain through next year. Corporate sector will maintain a higher than average growth and economy will still remain robust due to demand through domestic consumption. Rupee factor will remain volatile and dollar is more likely to hover well within 40. Crude will continue to remain high and will still be a large factor for global asset allocation,” says wealth manager Mrunmay Das of Das Capital Management and Advisors Pvt Ltd.
According to Das equity will remain attractive, but may not scale the dizzy heights of 2007 for countries like India. Within equity, value would be created only through a bottom up approach of stock picking. Investing in the right companies in the right businesses, which are insulated from broad macro headwinds, would be the way to go. Hence investing from the top of the surface like it happened in 2007 with most index stocks could not provide the right returns, says he.
Strategies for the year ahead
The average returns of equity mutual funds have been in the range of 50%-60% in 2007. The investment portfolios for 2008 can still maintain equity positions of 40%-60% based on the risk profiles of the investor. Investments in equities must be made with a 3-5 years horizon. Look for pharma mutual funds and stocks.
The sector has been a lagger this year but that is likely to change. “We recommend a 5% to 10% exposure in this sector,’’ says Daya Paul, a wealth manager.
Since markets are starting off from a high this is a time when one needs to manage risk carefully. While equities will continue to perform well in the long term, it could get volatile in the short term.
Diversification is key for the investor across sectors and avenues. Real estate mutual funds and real estate investment trusts can become a reality with the expected SEBI guidelines. “In the long term, gold is also expected to perform well. It would be useful to lock in long-term debt investments since interest rates are high,” suggests Anil Rego, CEO of Right Horizons, a wealth management firm.
Investment options
When markets are high, systematic investment plan (SIP) is a good option, especially for those who are unable to track markets
Gold is a good hedge for investors seeking safer investment avenues
Debt can be your bet if looking for lower risk avenues
Avoid export-oriented sectors for some time due to rupee appreciation. Preferred sectors are infrastructure, retail, energy, financial services, power, oil and natural gas
Start with equity mutual funds before you actually get into direct equities
Regular rebalancing of your portfolio greatly reduces the deviation of your investments, risk and ensures a steadier return
