Amit Jain feels the more domestic liquidity & trading activity have brought the Nifty back to 12,000 mark, which was primarily led by Reliance Industries & IT sector stocks.
The Co-founder of Ashika Wealth believes if FIIs increase their allocation, there could be much broader market rally across all sectors. Also, in 2nd half, there could be much better corporate earnings, hence the market may have further reasons to cheer up.
In his last interview in April 2020, he had advised investing in the IT, affordable automobile & Pharma sector. But now these sectors have already generated returns of 40 percent to 80 percent, hence it is time to rebalance, he said.
Q: What should be a plan for investments if a person with age of 25 and 30, wants to make a Rs 1 crore portfolio by 10 years?
At this age they should invest 20 percent in largecap funds, 50 percent in midcaps & 30 percent in smallcaps funds. This portfolio mix may be generating a CAGR of 15 percent in the next 10 years. If they do SIP of Rs 40,000 per month, then they may easily accomplish their goal of Rs 1 crore corpus. At every age interval of 5 years, they should increase their allocation to largecap funds to build a robust portfolio.
Q: What are those key sectors that one should have in a portfolio now to earn multibagger returns by 2022 and why?
In my last interview in April 2020 we advised investing in the IT, Affordable automobile & Pharma sector. But now these sectors have already generated returns of 40 percent to 80 percent, hence it is time to rebalance. At this point of time, we see good value in some selected midcap banks, PSUs & infra sector companies. We are cherry picking some good stocks in metal & manufacturing space as well.
Q: What could be spoilsport events that could dent sentiment in second half of FY21 and what could be favourable events that could take the Nifty to previous record high levels in the second half of FY21?
Only three events can dent investors sentiment in the second half of FY 2020-21 – 1) This current war between Azerbaijan & Armenia may culminate into a bigger war platform, where superpowers like Russia & America also join this fight. 2) No second stimulus by the US & European government as expected by global markets 3) Another global banking crisis post loan moratorium period ends.
Positive surprise in second half of FY 2020-21 may be more allocation by FIIs to Indian equities, as they have not bought Indian equities significantly in this calendar year, rather till date they are net sellers. It is more domestic liquidity & trading activity which brought Nifty back to 12,000 mark, which was primarily led by Reliance Industries & IT sector stocks. If FII increases their allocation, then we may have much broader market rally across all sectors. Also, in 2nd half we may see much better corporate earnings, hence the market may have further reasons to cheer up.
Q: The RBI recently increased the Loan to value ratio to 90 percent for home loans below Rs 30 lakh and Knight Frank India said Indian real estate witnessed private equity investments of $2,308 million in YTD 2020. Should one add real estate stocks to portfolio now and what is your pecking order?
Yes, RBI has taken some positive policy decisions in the last review policy, which may impact this sector positively. This sector is in bear run for almost a decade. However with increased focus on the domestic economy & in the era of Deglobalisation, this sector may start seeing some traction after such a long bear run. Soon we are expecting more stimulus from the central government to revive demand, which may have positive impact on this sector. In an economic scenario, where FD is giving less than 4 percent ROI post tax return & home loan is available around 7 percent, this sector is a good bet for long term investors.
Q: Do you think September quarter earnings will set the direction for the further earnings growth?
Yes very much. Market is closely watching these numbers to expand multiple of earnings for 2nd half of the financial year. Also, to a great extent the market is factoring in much better growth numbers in FY 2021-22, due to low base effect. We may see an exemplary growth number in 1st half of FY2021-22.
Q: Nirmala Sitharaman has been saying the government is open to further stimulus, assessing impact of the COVID-19 pandemic on FY21. Do you expect more stimulus measures despite fiscal constraints or do you think the government will wait for vaccine/complete normalcy in the economy?
In our view Government may be coming up with some bonanza for the sectors which impacted the most during COVID-19. We may say a further stimulus package in the form of the “Make for World” initiative. It will broadly cover the manufacturing & infrastructure sector of India. We may see some government policy action to lift the valuation of PSU companies, so that they can meet their divestment target.
Q: The pace of redemption pressure in MF reduced significantly in September. Do you expect net MF inflow in equity oriented schemes during October or will the trend of last three months remain in October too?
In my view, as the market moves higher, we may see declining inflow in equity schemes. However, if we get a second stimulus from the US Federal Reserve, then we may see increased inflow from FIIs. Till September 2020, FIIs are still at a net sell figure of Rs 62,000 crore for current calendar year. At the current expensive valuation of the market, retail investors may continue to be conservative.
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