Google has published the See what was trending in 2020 and Corona Virus was on the top, I am sure for many of you this year would have been exceptional for your financials as well.
Lessons from 2020:
I don’t need to describe how year 2020 went and I hope the event like Corona happened this year will not happen to immediate next year, but honestly sharp fall (happened in March 20) and rise (happened after that) could not benefit to many investors, I always believe the trust only build when the market slowly goes up and down and every one get’s benefit, with this kind of market participation generally would be less by retails like us.
We have consecutively got more 1 Lakh Cr inflows for 2 years and mostly for year 2020 it came in the second half, I called it as Doller Tsunami ($ Tsunami), I think it happened first time and believe in 2021 net FII Investment figure would be positive with below reference:
- In USA the interest rates would be low, FED already said “till 2023 interest rate would not increase and to do whatever it takes for as long as necessary“. so equity would be major beneficial, if developed markets would get the easy money (Stimulus, simple monitory policy) then India would definitely :-).
Now we have seen the domestic out flow from July 2020 onwards, looking at the below chart one can easily interpret that it’s purely the profit booking from retail investors since the market is almost touching the life high, I think this call should be left on Fund Manages and individuals must be stay invested with the trust, I strongly believe that this should STOP, else the whole intent of long term is lost.
One interesting observation we can also derive that let’s say if FII’s start booking the profit and selling happens in 2021, the individual who took out the cash from July will be ready to invest, it would support the market at the lower levels.
Before that I start this I strongly feel PSU’s (Government Companies) are having strong outlook because of divestment story, many companies are in line for it.
Equity: Mostly I feel the year 2021 will belongs to Mid/Small Cap rather than Large Cap with below references.
- Sentiment and Trend is still positive.
- Global Liquidity is big positive for equity.
- Rate of Interest of less (Fix income will be no more then 3-4% post tax).
- Corporate result outlook is positive for up coming quarters.
Real Estate: it’s underperforming from past 6-7 years, I think mostly it should not go down further (expecting floor came), but might not also go up quickly, I strongly recommend that “it’s a good time to buy a home if some one is looking for self living” .
- Home loan interest rates are life time low (roaming between 6-7%)
- Ready possession flats are at lower cost than under constructions, mostly in the affordable segment, In premium segments still I see the price appreciation will be under pressure, but might not reduce.
- Commercial Segment is still negative because still it will have effect of Corona and Economic crisis.
Gold: Gold will still be making money, but only if you make entry in the price band around Rs. 4500 – 4800/-, I see the upside in 2021will be capped in between Rs 5500 – 5800/- So if you make entry around 5000 then appreciation might not happen much in 2021.
I recommend reading below articles written to understand gold investments
A very nice piece on Gold from Sprott Gold Report this week. Every portfolio must a good component of Gold as a Hedge is my belief. I recommend a half you age as percent of net worth in it.
Fixed Income: Fixed Income would be under pressure because of low interest rates, if you still wanted to invest into Fixed Income then I would suggest Overnight / Short Term funds, If you have more then 5 years view the GILT funds would also better and 7 years or more go for Equity funds.
If you have to change the course of your investment life, you have to start somewhere, take some risk, spend some time, try some new things, experiment, get out of your comfort zone then assess and then if all good, scale up.
Tomorrow its going to be a beautiful morning and day. Wish you all a very happy and healthy new year 2021.