Equity is still the ‘best-in-class investment’

Our Bureau Chennai | Updated on August 11, 2019 Published on August 11, 2019

Despite the current volatility, equity continues to be one of the best asset classes for investment, and this is the right time to consolidate your portfolio, felt the panelists discussing ‘Financial Planning in Turbulent Times’ at BusinessLine’s Surge SME Conclave.

All four panelists — KS Rao, Head, Investor Education and Distribution Development, Aditya Birla Sun Life Mutual Fund; Shyam Sekhar, Founder, ithought; Ravi Saraogi, CPD Committee Member, CFA Society of India; and S Venkatesan, President, Tamil Nadu Investors Association — felt that over a 10-year period, returns from equity could be 9-11 per cent.

“This is the year to consolidate and stay put with SIPs. Markets have started surging in the last two days. This is an opportunity. A minimum period of three years is preferable to check the performance of a fund and to switch out of under-performing funds,” said Rao.

While it is difficult to do a forecast for the next 10 years, investors should feel confident that equity, as an asset class, has always been performing well. Irrespective of what returns one may get in the next 10 years, equity will be one of the best performers,” he said.

“I am a little more optimistic. This government is capable of doing better,” he added. There is a lot of uncertainty in the minds of investors on what is going to happen, but there is no panic or fear. People are sitting on cash, said Venkatesan. There is going to be pain, but “we can see light at the end of the tunnel,” he added.

Ponzi schemes

Investors are cognisant of the fact that earnings have not picked up. There is pain in the foreseeable future. “However, there is no instant pain reliever or pain balm coming our way. Investors know that markets go up and down, and unlike in the past, I don’t think people will fall for ponzi schemes. Investors have learnt the lessons,” he said.

However, he cautioned investors to look out for three major macros — crude, currency, and interest rates. One will not get returns even if one has invested in the best of funds at the wrong time, he said.

According to Sekhar, “going forward, we are doing reforms, efficiencies will show up, and should translate into earnings. When the markets are weak, make use of the opportunity.”

Newer industries have to come back. In 2000, it was technology; in 2008, it was infrastructure and power. Recently, it was small and mid-cap. “We are at the point in time when macros will start changing in our favour. The high-cost inventory has to go out first. Then the low-cost inputs starts and then the first signs of growth emerge. “This financial year is a wash-out. We would possibly see a recovery in the first quarter of next year in earnings recovery. But, this does not make me negative about the situation,” he said.

In India, mutual funds have had a terrific run. But in 2018, a weird thing happened with many diversified equity funds not beating the benchmarks. This happened for the first time and there was a lot of talk about index investing. But passive investing is still small in India with a 4 per cent market-share because EPFO invests in the equity market through the index market route. It is an exciting product, said Saraogi.

All the panelists felt that investors should not act in haste and change their long-term asset allocation.

The discussion was moderated by SK Lokeshwarri, Head of Research Bureau, BusinessLine. Earlier, Aarati Krishnan, Editorial Consultant, BusinessLine, gave a presentation on the ‘Five Simple Secrets to Wealth Creation.’

Published on August 11, 2019
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