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Investment strategies for asset classes for FY22

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NEW DELHI:The start of a financial year is an ideal time to plan for savings, spending as well as investment, as it helps manage money and achieve goals, say financial pundits.

Fiscal 2021 has been quite interesting in terms of investment. While Indian equity markets have surged around 70% over the last year, returns on gold have been flat for the same period. However, there were periods when gold had a commanding lead over equities during the year. Among equities, small-cap indices surged over 110%.

To aid investment decisions, Motilal Oswal Private Wealth Management has listed out strategies across asset classes for the upcoming financial year.

For the equity segment, the wealth manager for high net worth and ultra-high net worth individuals suggests increasing allocation to stocks by investing 50% in a lump sum and 50% in a staggered manner over the next three to six months in multi-cap strategies and select mid- and small-cap strategies.

The wealth management firm expects Nifty’s earnings per share to have grown 15% year-on-year in FY21, and to see rise another 33% in the upcoming financial year.

As per risk profile, investors having the appropriate level of equity allocation should continue to remain invested and increase allocation if they are lower than desired levels. New investors should accelerate deployment in the event of any sharp correction.

“The 3QFY21 corporate earnings results continued the strong momentum from 2QFY21 with much better-than-expected PAT growth and earnings upgrades. For the Nifty50 companies, as against an expected YoY PAT growth of 7%, the actual growth stood at 22%. This much-awaited earnings recovery is likely to provide a strong tailwind for the domestic stock market,” said Ashish Shanker, deputy managing director, Motilal Oswal Private Wealth Management.

For fixed income class, the wealth management firm suggests a barbell approach where ‘accrual’ should precede ‘duration’ and the overall portfolio average maturity should be between two and five years, with a sufficient long-term investment horizon according to the investor’s risk-return profile.

As much as 75-80% of the fixed income portfolio should be biased towards high-quality short-to-medium term (two-five years maturity) accrual strategies with a minimum investment horizon of three years.

“Within the above allocation, 15-20% can be allocated towards long maturity and high-quality roll down strategies with a minimum investment horizon of five years,” the wealth management firm said in a note.

For gold, Motilal Oswal Private Wealth Management said the precious metal should be treated predominantly as a hedge against heightened volatility. Investors can participate via sovereign gold bonds, gold funds, and digital gold.

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