Equity investors saw a rapid streak in 2020. While the year started with leading indices hitting all-time highs, stock prices fell sharply in March 2020 due to the Covid-19 outbreak. Then came the big change and the year ended with a profitability of almost 16 percent. By 2021, investors will be looking closely at investment opportunities. It remains to be seen which sectors or investment themes will be at the forefront and which asset classes, in addition to stocks such as gold and real estate, will perform in 2021. The main indicator will also be the trend of interest rates in 2021.
These are some of the experts who provide their perspectives on investment opportunities in 2021 and the key observation that investors should be aware of.
Nitin Shahi, Executive Director, Findoc Financial Services Group
Even with the stock market price nearing record highs, stocks are still the best option for an investor to invest in in 2021. Specific stocks, especially some sectors, could continue to rise in the current year. The information technology, pharmaceuticals, insurance and health sectors are among those that will continue to perform well in the coming years.
On the topic front, electric cars and digital toys are two topics one can look forward to.
Since interest rates are low at all times, risk assets are a better investment option. Being on the conservative side, other options might be to rack up gold with each dip and invest a small portion of the portfolio's funds in debt to maintain a good mix.
Other options are bullion and real estate as well, but since it's easier to get in and out of the stock market easily, it becomes the obvious choice.
Subramanya SV, co-founder & CEO at Fisdom
Given the abundance of liquidity, the economic recovery and current valuations, investing in a flexible capital strategy and / or a multiple capital strategy should be beneficial for equity investors.
For those looking to invest in debt funds, it would be advisable to keep the duration of the portfolio in the range of 2 to 2.5 years in the short term. It is imperative to stick with the trend towards AAA rated sovereign securities. Bank debt funds, PSUs, and short-term debt funds can be good categories to consider.
In the wake of the massive stimulus, we can expect the dominant currencies to give in to pressure. This would set the stage for a rebound in gold prices.
The interest rate is expected to remain low in the coming quarters, so that debt investors can continue to be investment vehicles in the short and medium term. RBI consistently maintained its position on the growth approach. Therefore, investors should consider blocking their investment in long-term debt only after the Reserve Bank of India starts raising rates in the future.
On the equity front, it continues to offer what no other asset class can in terms of long-term profitability potential. The stock market keeps popping up constantly due to excess liquidity due to the firm position taken by governments around the world and in India to normalize the situation. At the same time, economic activities are recovering at a much better rate than expected.
With markets at all-time highs, this could be a good opportunity for equity investors to review their existing equity portfolio and switch to better opportunities within stocks if they wish.
One strategy might be to liquidate medium-yielding stocks or funds and gradually invest the same funds over the next six months. If financial goals emerge within a year, it would be a good strategy to sell or get 25 to 30 percent of the stake for those goals now and the rest in the next few days.
And if someone wants to invest a lump sum of Rs. 100 long-term in stocks Currently, a tiered approach to spreading this investment over 6-9 months would be best in 2021.
Watchouts for investors
But what if the investment scenario for investors deteriorates in 2021? These are some of the key controls that every investor should monitor:
"Sticking to the fundamentals is important and has always worked. After an eventful year in 2020, most of us have learned our lessons as investors. The idea should be to avoid getting too excited or overreacting if things get as bad as 2020, which is quite unlikely. Following a disciplined investment approach and retaining asset allocation is key,” says Chetanwala
“Though not likely to materialise soon, the risk of rising yields and inflation is very much within the realm of possibilities. This could impact equity returns adversely. Along with these economic risks, a risk to public health continues to remain a critical metric to keep an eye on,” cautions Subramanya SV.
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