New investment options in new Savant, mutual fund investors need to balance equity, gold and debt.

India’s growth story remains strong despite global uncertainty, geopolitical tensions and stock market volatility. There are investment opportunities in the country in sectors like manufacturing, renewable energy power, financial services and consumption. However, it is important for mutual fund investors to take investment decisions as per their risk appetite and financial goals. This was said by experts in the first session of ‘Business Standard Hindi’ webinar ‘New Samvat, New Beginning: An opportunity for investors to reset their portfolio’.

Venkat N., Chief Executive Officer (CEO) of the Association of Mutual Funds in India (AMFI) in the panel discussion organized on the topic ‘New options for earning and investing for investors amid global challenges’ in the first session. Chalsani, Rahul Singh, CIO (Equities), Tata Mutual Fund and Jitendra Shriram, Senior Fund Manager (Equities), Baroda BNP Paribas Mutual Fund participated.

During this discussion with Business Standard’s Ashutosh Ojha and Khushboo Tiwari, experts explained which areas investors should keep an eye on, what should be the share of equity, gold and debt in the portfolio and what should be the investment strategy amid market fluctuations. Edited excerpts from the conversation in this discussion…

Question: What investment opportunities exist in India amid global challenges?

Chalsani: There are many investment opportunities in India. Manufacturing and renewable energy are areas where there is great potential ahead. India has set a target of zero carbon emissions by 2070. To achieve this, huge investment will be required. This will create new opportunities.

The young population of the country is also a big advantage. About 65 percent of India’s population is below 35 years of age. This is likely to increase consumption. Despite all the challenges, the country’s economic growth rate remains around 7.2-7.3 percent. In such a situation, investors should have faith in India’s long-term growth story.

However, it is not easy for every investor to invest directly in a stock or sector. For this, it is important to understand the financial position, valuation and quality of management of the company. Investors who do not have this expertise can invest through mutual funds. Mutual funds have products for every need of investors.

Question: Which signs can be positive for the stock market in the new Samvat?

Rahul Singh: There are signs of improvement in the earnings of big stocks i.e. large cap companies. The profit growth of these companies has been weak for some time, but now it is expected to pick up. This could be a good sign for the market.

Apart from this, improvement in global conditions can also support the Indian market. If geopolitical tensions reduce after the US mid-term elections and crude oil prices stabilize, it will be positive for the market.

There has been a lot of investment around the world in the field of Artificial Intelligence (AI). India has lagged behind in this race, but this may create opportunities for power and data center related companies in the country.

Question: Despite the selling by foreign investors, what is the strength in the Indian market?

Jitendra Sriram: In recent times, foreign institutional investors have withdrawn huge amounts of money from the Indian market. Foreign investment worth about 40-43 billion dollars has gone out. However, during the same period, foreign investors have also sold in markets like Taiwan and South Korea. Therefore, the situation of the Indian market should not be assessed only on the basis of foreign investment figures.

Continued participation from domestic investors has helped maintain liquidity in the market. This has reduced the impact of selling by foreign investors to some extent. If the confidence of foreign investors returns, it can support both the market and the rupee.

Question: When there are fluctuations in shares, gold and debt, then how to diversify the portfolio?

Rahul Singh: Investors should include different asset classes in their portfolio. The movement of equity, gold, silver and debt does not always remain the same. Many times the stock market falls, but gold performs better. Similarly, changes in interest rates affect debt investments.

Better returns can be expected in the long term from equities, as the stock market moves with the earnings of companies. At the same time, gold and debt can help in balancing the portfolio. Therefore, investors should keep their mix as per their need and risk appetite.

Question: How much share should be kept in equity, gold and debt in the current circumstances?

Rahul Singh: Given the current circumstances, for example, 60-65 per cent of the portfolio can be kept in equities. Gold and silver may have 15-20 percent share. The remaining investment can be kept in debt.

However, this is not a fixed formula. Global circumstances change rapidly. Therefore investors should review their portfolio from time to time. Asset allocation should not be decided based on one year’s performance alone.

Question: Should gold be included in the portfolio?

Jitendra Sriram: Gold can act as a protective shield for the portfolio. Sometimes gold performs better when there is pressure in the stock market or debt. One reason for this is that gold prices are affected by the dollar and global conditions.

Therefore, gold should have some share in investors’ portfolio. However, how much of it to keep depends on the risk appetite and financial needs of the investor. Investment decision should not be taken only by looking at the returns from gold.

Question: Do investment opportunities still exist in small cap stocks?

Jitendra Sriram: There has been a good recovery in the earnings of small cap companies in the last few years. The market has also performed largely in line with this earnings growth.

Apart from this, after Covid, companies want to expand their supply chains to different countries. Many small companies of India have benefited from this. For example, large automakers get help from their smaller component suppliers. Similarly, small companies in the pharmaceutical and chemical sectors have also got opportunities.

However, the risk is higher in small caps. Therefore investors should not invest only on the basis of past returns.

Question: Can India become a protective shield against the decline in foreign markets?

Jitendra Sriram: India cannot be considered completely isolated from global markets. If any major incident happens in America or other big markets, it can impact India also. But India’s economic development has many bases of its own. There are opportunities for consumption, domestic investment and growth in various sectors.

Because of this, the impact of global markets on India may be reduced to some extent. However, it would not be right to consider it a completely safe market.

Question: What should SIP investors do if they get low returns in the market?

Chalsani: Systematic Investment Plan (SIP) has played an important role in bringing changes in the behavior of investors. Due to this, people are investing in a regular and disciplined manner. If the market falls, investors can get more units at a lower price.

Investors should first decide their financial goals and then make regular investments accordingly. Closing SIP after seeing market decline or low returns is not the right way. Portfolio review is an ongoing process and investors should focus on long-term goals.

Question: Can Specialized Investment Funds (SIFs) become a new option for investors?

Jitendra Sriram: Mutual funds are designed for common retail investors, while Portfolio Management Services (PMS) are primarily for large investors. Specialized Investment Funds (SIFs) give investors the option of some different and specialized investment strategies.

The level of risk in these may be different from traditional mutual funds. Therefore, investors should invest in them only after understanding their risk appetite. This is a new option in the investment products category and will grow with time.

Question: Will it be right to invest in a sector like defence?

Rahul Singh: Defense is a sector where investment opportunities exist. In India, the government is promoting domestic production of defense equipment. Production of the things which were imported is now starting in the country.

However, investing in any one limited sector may increase risk. Investors should also look at the company’s valuation and its earnings prospects. Investment decisions should not be taken only on the basis of good prospects of any sector.

Question: What three things should investors keep in mind in the new Samvat?

Chalsani: Investors should remember three things – stay informed, be disciplined and maintain diversification in their investments. Avoid taking hasty decisions amid market fluctuations. Invest as per your financial goals and maintain a long-term perspective.