In an interview with ETMarkets, Mahajan said, „Individuals aged 30-40 without short-term goals should focus on building an emergency fund that covers 12-18 months of expenses and then allocate 80% to stocks. There is a need to do so.” ” Edited excerpt:
Q: The Indian market hit a new high in February 2024. witty It has reached the 22K mark. As we enter the final month of the financial year, history shows that Nifty has posted positive profits in four of his last 10 years. Where is the market heading?
A: Yes, the market has been in a secular bull market for the past four years, and the recent GDP The digitization of numbers and financial savings is further driving this trend.
Individual participation in the stock market has been steadily increasing and has reached significant levels. In January, around 46.7 million mutual fund folios and 46.84 million demat accounts were opened, giving a major boost to the stock market through domestic capital inflows.
The upcoming elections indicate the possibility of a stable government in India. However, it is difficult to predict short-term market movements. Nevertheless, over the long term, assets are expected to compound at a robust pace, supported by good governance, high GDP growth and a focus on manufacturing.
Q: Last week, the GDP data for the March quarter was released. What does this data suggest about the overall health of the economy, the RBI's interest rate outlook, and the impact on markets?
A: The economy's actual performance has consistently exceeded expectations, with structural transformation underway in both physical and digital infrastructure, and comprehensive policies to increase purchasing power. This is a very positive sign for India, reflected in the revised FY24 GDP growth forecast of 7.6%. The Reserve Bank of India (RBI) opted to maintain the status quo in interest rates and kept the repo rate unchanged. 6.5%, a continuation of the approach aimed at controlling inflation while maintaining economic stability. Despite concerns about food inflation, core inflation is showing signs of softening, prompting a positive market reaction.
Q: Given that you are trading near all-time highs, are you fully invested or are you taking some capital aside for later deployment?
A: We are almost fully invested in our portfolio and maintain 4-6% cash across our portfolio. We seek replenishment for investments in undervalued businesses and strategic acquisitions, ensuring some liquidity for our clients while preparing for opportunities.
Q: How should investors be positioned for FY25 and what should be the ideal asset allocation for individuals aged 30-40?
A: Investors should adhere to an asset allocation strategy based on their age, risk tolerance, goals, and time horizon. Individuals between the ages of 30 and 40 should have no short-term goals and focus on building an emergency fund that covers 12 to 18 months of expenses, followed by an 80% allocation to stocks.
Considering the current scenario, it is recommended to allocate 80% of the equity allocation through weekly STP in the next 8-10 weeks and adjust the remaining allocation according to the prevailing situation after the elections. STP/SIP remains the preferred route for investment.
Q: Oil and gas, energy, PSU index It's up more than 30% in the past three months. What is causing this rise?
A: Historically, these sectors have underperformed, but we are seeing growth due to the government's focus on clean energy and non-performing asset recovery, especially in the PSU space.
However, there is froth in the small-cap and micro-cap segments and certain sectors like defence, railways and PSU banks. Investors should be cautious, considering valuation metrics and expected returns, rather than following herd psychology.
Q: Are high-dividend stocks better to overcome 25-year volatility? What percentage of my portfolio should be in dividend stocks?
A: Yes, it is wise to allocate 10-15% of your portfolio to high-dividend stocks. However, to avoid stock prices falling despite receiving dividends, investors should prioritize companies with clean management practices.
Q: What role will debt play in the coming years? Also, do you expect debt portfolios to gain popularity in the retail industry and his HNI industry?
A: Bonds are expected to generate capital gains from interest rate cuts over the next 1 to 18 months, with the potential for double-digit pre-tax returns. Parking debt allocation in gilt/debt funds with a fixed period of more than 7 years can be profitable, giving rise to both coupon and capital gains. This is different from fixed deposits, where you only earn profit from interest income.
Q: After Lakshadweep, PM Modi hinted at deep-sea tourism. Are there any specific companies that could benefit from this move?
A: We prioritize companies like ITC and Lemon Tree in our portfolio. Additionally, we are monitoring construction companies, tile, cement, and FMCG companies for potential benefits from deep-sea tourism initiatives.
Q: So far in 2024, more small business IPOs have appeared on D Street compared to the main board. How do you evaluate this trend? Is it a good sign or a warning sign?
A: We are cautious about this trend as valuations are abundant and liquidity is limited, especially during periods of market correction. It is wise to wait until valuations normalize before considering investing in IPOs of small and medium-sized companies.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of Economic Times)