As the New Year 2021 kicks in next week, analysts on Dalal Street are advising investors to give more weightage to equity in portfolio allocation despite expensive stock valuations.
A dozen brokerages which took part in the ETMarkets’ New Year Survey suggested going for a diversified portfolio with an average of 45-70 per cent allocation to equity, 15-40 per cent to bonds and 5-20 per cent to gold.
This means if you have to invest Rs 1 lakh next year, Rs 45,000-70,000 should go into equity and the rest to fixed income assets and gold. Some analysts have advised wealthy investors to take exposure in real estate too.
BSE benchmark Sensex gained 10 per cent to around 45,554 on December 21 from 41,253 on December 31 last year.
The survey saw some analysts projecting the Sensex to rise as high as 51,500 by the end of next year, indicating an upside of 13 per cent from current level. For Nifty, the highest target is 15,100. The broader 50-share index closed at 13,328 on December 21.
Naveen Kulkarni, Chief Investment Officer at Axis Securities, said investors should put 70 per cent of any fresh investments in equities, 20 per cent in bonds and the rest in gold.
Deepak Jasani, Head of Retail Research at HDFC Securities, said HNIs can invest 50 per cent of their portfolios in equities, 30 per cent in bonds, 15 per cent in real estate and 5 per cent in gold
Gold prices have risen over 25 per cent to more than Rs 52,000 per 10 gm since the beginning of this Calendar. On the other hand, the 10-year benchmark bond yield has declined to 5.96% per cent from 6.55% as of December 31 last year. There is an inverse relationship between bond prices and bond yield. Data available on Value Research showed long duration debt funds have delivered an average 12 per cent return in last one year.
“Equity is likely to outperform other asset classes in 2021,” says Gaurav Garg, Head of Research, CapitalVia Global Research. “One should have 45 per cent exposure to equity and 15 per cent each to gold and bond. However, I see limited upside for the yellow metal. Wealthy investors can have 25 per cent exposure to real estate. I see opportunity and value unlocking in the realty space,” he said.
Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities, said based on the pecking order, his first choice and highest allocation could be to real estate followed by equities, bonds and gold. He did not provide specific weightage to any asset class.
Ajit Mishra, VP Research at Religare Broking advised investors to put money in the three most liquid asset classes — equities, bonds and gold – and avoid investing in real estate, as it could lead to capital erosion due to high uncertainty.
“Aggressive investors can invest about 60 per cent in equities and 20 per cent each in bonds and gold. A conservative investor may have 40 per cent exposure to bonds, 40 per cent to equities and 20 per cent to gold,” Mishra said.
