Investment options: 6 themes and trends you must follow to make your portfolio shine in next 12 months


Your investment portfolio came under strain this year, mainly because of oil prices and rupee headwinds. But things have calmed down a bit.

The signs are clear. Oil is sobering up, with prices coming off a high of $86 per barrel to below $70 now. GST collections are showing promise and the rupee is moving towards some stability.

What’s up next? Market participants have state elections this month and next, and general elections in early 2019 clearly in sight. The ever-changing global trade dynamics also remains a wild card.

To be sure, these factors will have a bearing on how your investment looks, going ahead. On top of that, here are six trends that you would do well not to miss.

Financial theme takes focus
The recent sharp correction in domestic stocks was a fallout of a debt default by IL&FS group companies. While those extreme concerns, according to Tata Mutual Fund, have subsided with some support from banks and RBI, the growth aspirations of NBFCs will get curtailed as capital conservation becomes a priority.

This could lead to some market share consolidation and more importantly gain in pricing power for corporate banks. Besides, there is a growing evidence that the stressed asset pool of corporate lenders has peaked, which means lower loan-loss provisions and higher RoE (return on equity) over the next 12-18 months.

The RBI is reported to have already cancelled close to 400 licences of NBFCs during January-September.

“On the NBFC side, under stress, the stronger business models would be able to strengthen themselves. Stronger business models are those where assets’ duration and liabilities are more or less matched and do not mean a significant increase in borrowing costs. All these factors will really distinguish a quality business model from one that really came under stress on the liquidity front,” Shilpa Kumar, MD and CEO, ICICI Securities, told ETNow.

Consumption: Time to go premium?
Demand for premium products remained robust during the festive season.

Take this. Nilesh Gupta, MD, Vijay Sales, in an interaction with ETNow said, “Diwali 2018 was different from Diwali 2017. The major difference is there was a lot of uptake on premium goods. Growth this year came in majorly from high-end televisions of 55 inches, 65 inches and even 75 inches to a large extent… Most important are top end premium television OLED televisions. Actually, all the three brands ran out of stock. I think that is a very positive shift which we have seen this Diwali and we saw the same trend in the case of refrigerators also.”

Analysts said consumption in FMCG and discretionary has revived after the disruptions of GST, but there are early risks emerging in the form of tepid festive sales, especially for the auto segment. “Lower fuel prices and stable interest rates can arrest this slide once the inventory normalises by the end of this quarter,” Tata Mutual Fund stated.

A growth rate of 21.5 per cent in the top line of over 1,400 listed companies that have declared their Q2 results is seen as a reflection of improved demand in the Indian economy. However, margins took a hit due to higher input cost in the form of a weak rupee and higher crude prices, leading to 24.90 per cent expenditure growth.

The overall impact of the reduced credit availability due to fund constraints at NBFCs in the SME segment and income growth needs to be monitored. “Overall, the discretionary consumption trends need to be watched closely to conclude whether the slowdown is temporary or persists in Q1 of 2019,” Tata Mutual Fund added.

Capex cycle on a rebound
Industrial capex cycle is on the mend as capacity utilisation across the economy has improved, according to Tata Mutual Fund. While capex in power and metal is missing, the strength in orderbook has been driven by process industries, roads and urban infra. There are risks that a fractured electoral verdict may disrupt these trends, but some of the underlying forces go on to suggest that it could be at best a temporary setback.

“Maybe as a knee-jerk reaction, but general election next year 2019 can be a big risk for markets,” said Siddharth Sedani, Vice-President, Equity Advisory, Anand Rathi Shares and Stock Brokers.

FMCG: Follow the margins
Volume growth in H1 FY19, a margin show and sharp correction in these stocks make the valuations more attractive. “Companies with a market share gain potential and margin tailwind makes for better investment within FMCG,” stated Tata Mutual Fund.

Dinesh Rohira, Founder and CEO, 5nance.com, said, “We are positive on select FMCG sectors which are expected to be partly driven by growing consumption of premiumisation brand along with a revival in rural demands.”

IT – Mind the gap
Higher US rates and trade policies have raised risks of an economic slowdown that could start impacting corporate IT spends, according to market experts. “We believe that the structural drivers of corporate spends will see through any cyclical slowdown. There is a case for relatively inexpensive frontline IT stocks to fare better amid this uncertainty,” said Tata Mutual Fund in its report titled Swimming not Running.

Look out for redemptions
Markets are getting used to strong and consistent inflows in mutual funds from domestic investors. Any change in direction in inflows would act as a negative surprise for the market as well as your portfolio. Domestic institutional investors have bought shares worth of Rs 1,05,845 crore in 2018 till November 12 whereas foreign institutional investors have offloaded shares worth Rs 44,273 crore during the same period.



Source link

Be the first to comment

Leave a Reply

Your email address will not be published.


*