Here are a few experts giving their views on the investment opportunities in 2021 and key watchouts for investors to take note of.
Equity continues to offer what no other asset class can offer when it comes to return potential in long term.
The equity investors were witness to a roller-coaster ride in 2020. While the year began with leading indices hitting all-time-high levels, the stock prices fell sharply in March 2020 because of the Covid-19 outbreak. And, then came the big reversal and the year ended with a return of nearly 16 per cent. Moving into 2021, the investors will be closely looking at investment opportunities. It remains to be seen which sectors or which investment themes will be the front runners and which other asset classes other than equities such as gold, real estate will perform in 2021. A key indicator will also be the interest rate trend in 2021.
Here are a few experts giving their views on the investment opportunities in 2021 and the key watchouts for investors to take note of.
Nitin Shahi, Executive Director, Findoc Financial Services Group
Even with stock market trading near all-time high, equities still provide the best option for an investor to invest in 2021. Stock specific and particularly some sectors can continue their rally in the current year. IT, Pharma, Insurance, Healthcare are few sectors which will continue to do well in upcoming years.
On theme front, Electric Vehicles and Digital play are two themes one can look forward to.
Since interest rates are at all time low, risky assets are a better option to invest. Being on a conservative side, other options can be to Accumulate Gold on every dip and invest a small portion of portfolio In Debt funds to keep a good mix.
Other options are bullion and real estate as well, but since it is easiest to enter and exit the equity market easily, it becomes the obvious choice.
Subramanya SV, co-founder & CEO at Fisdom
Considering abundant liquidity, economic turnaround and the current valuations, investing in a good Flexi-cap and/or multi-cap strategy should play out well for equity investors.
For those seeking to invest in debt funds, it would be advisable to maintain the portfolio duration towards the 2 to 2.5-year short term threshold. It is imperative to stick with an orientation towards sovereign & AAA-rated securities. Banking and PSU debt funds and short-term debt funds could be good categories to look at.
As an aftermath of the mega stimulus, we can expect dominating currencies to succumb to pressure. This would set the foundation for an uptick in gold prices.
Interest rate is expected to remain low in the coming few quarters and hence debt investors can continue to be in short to medium duration investment instruments. RBI has constantly maintained its stand of focusing on growth. Hence, investors should look at locking their investment in long term debt only after RBI start increasing rates in future.
On the equity front, it continues to offer what no other asset class can offer when it comes to return potential in long term. The stock market continues to surge constantly on excess liquidity due to the firm stand taken by governments across the world and in India to normalize the situation. At the same time, economic activities are reviving at a much better pace than expected.
With markets at an all-time high this could be a good opportunity for equity investors to review their existing equity portfolio and switch to better opportunities within equities if they wish.
One strategy can be to liquidate average performing equities or funds and invest the same money gradually over the next 6 months. If any financial goals are coming up within a year, it would be a good strategy to sell or redeem 25 – 30 per cent of holding for those goals at present and the rest in coming days.
And, if anyone wants to invest a lump sum of Rs. 100 for the long term in equities at present, gradual approach of spreading this investment across 6 – 9 months will be better in the year 2021.
Watchouts for investors
But, what if the investment scenario deteriorates for the investors in 2021? Here are some key watchouts that every investor need to keep an eye on:
“Sticking to basics is important and have always worked. After the eventful year of 2020, most of us have learnt our lessons as investors. The idea should be to avoid being overexcited or over-reactive if the situation turns 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.