As the NDA gears up for a second innings, speculations about market performance are at its heights. While seasoned players are optimistic about equities, some continue to harbour slight doubts. A Balasubramanian, MD and CEO, Aditya Birla Sun Life AMC, in a conversation with Yagnesh Kansara advises investors about dealing with asset allocations.
NDA 2.0 is a reality. The current macro-economic and geo-political situation is challenging compared to NDA 1. In this scenario, do you think the strength of the new regime will be put to test?
A: While the mandate provides an opportunity to push through tough decisions to drive the economy to its next level, the recent slowdown in automobiles, consumption growth in the rural economy, issues such as NBFC and HFC, would demand substantial attention immediately. At the same time, the main priority of the new government would be to make GST a grand success by way of making it contribute to the tax growth and thereby help in lowering fiscal deficit going forward.
How long will it take for the new government to put the economy back on track?
A: In my view it is unfair to expect for growth to come over the next 18 months, given the general slowdown in global economies. However, the determination of the government in making India a five trillion dollar economy would drive many things in that direction. As long as we are able to clock 7.5 to 8 per cent growth, it will position India as one of the fastest growing economies.
What strategy retail investors should adopt over the next four quarters?
A: Retail investors should consider committing to disciplined long-term journey by investing in equity mutual funds. Equity as an asset class should do well over the next few years backed by change in outlook for our country and expected earnings improvement.
According to you, which are the safe sectors?
A: The one sector that continuously performs well is the consumption sector and companies owned by multinational promoters operating in India. There are dedicated funds to these sectors. A revival of interest in public sector enterprises due to consolidation and efficiency returning is also on the rise.
Understand that, equity as an asset class is volatile in the short term. Hence one has to be tolerant to volatility in the short run if choosing equities.
Your advice on cautions investors should exercise and asset class mix they should focus on.?
A: One should build equity at regular intervals in the form of SIPs to overcome short-term volatility. At the same time, keep an eye on overall asset allocation between equity and fixed income. Asset investment should be approached with the goals of saving, wealth creation and tax planning to ensure benefits.