As the new Samvat year (2077) kicks off this week, analysts on Dalal Street are suggesting that investors should give more weightage to equity in portfolio allocation despite expensive valuations. A dozen of brokerages in an ETMarkets’ Diwali survey suggested going in for a diversified portfolio with an average of 40-70 per cent allocation to equity; 5-15 per cent to gold and 15-40 per cent to bonds.
It means if you have to invest Rs 1 lakh this Diwali, Rs 40,000- 70,000 should go into equity and the rest to gold and fixed income assets.
Samvat 2076 is going to end on a positive note. BSE benchmark Sensex advanced 9 per cent to 42,597 on November 9 from 39,058 last Diwali in October 2019. The survey highlighted that Sensex may rise to 47,000 by next Diwali, indicating a 10 per cent upside from its current level.
Considering the prevailing market condition, Narendra Solanki, Head of Equity Research (Fundamental) at Anand Rathi Shares & Stock Brokers, said portfolio diversification usually depends on risk appetite of the investor. “However, assuming a median age of 35 years for an individual with own home, one can have a mix of 60-70 per cent in equities, 15-20 per cent in debt and 10-15 per cent in gold.”
Gold prices have jumped 40 per cent to Rs 54,100 per 10 gm since last Diwali. On the other hand, the 10-year benchmark bond yield has declined to 5.88% from 6.69% on October 29 last year. There is an inverse relationship between bond prices and bond yield. Data available on Value Research showed debt long duration mutual funds have delivered an average return of over 12 per cent in last one year.
AK Prabhakar, Head of Research, IDBI Capital Market, suggested 70 per cent allocation to equity and 20 per cent to bonds and 10 per cent to gold. Jyoti Roy, DVP Equity Strategist, Angel Broking suggested 60 per cent to equities for moderate risk-taking investors, with 30 per cent in bonds and 10 per cent in gold. For conservative investors, he advised 40 per cent allocation to equity and bonds and the rest to gold.
Top Diwali stock picks from 6 brokerages for Samvat 2077
What does the new Samvat hold?
From extreme pessimism in March 2020, the stock market recovery has been incredible as it inches closer to the previous lifetime high. BSE Sensex is less than 400 points away from its record high of 42,273 scaled on January 20 . Notwithstanding the uncertainty on many economic fronts, analysts believe the worst is over for the capital markets. AK Prabhakar, Head of Research at IDBI Capital Markets, says Sensex can hit 45,000 by next Diwali and investors should give 70 per cent exposure to equities at this point with 20 per cent to bonds and 10 per cent to gold. Analyst says Vikram Samvat 2077 could well be akin to Calendar 2003 from a market standpoint. The 30-share Sensex had jumped five times between July 2003 and December 2008. To make your portfolio future‐ready, here is a list of 50 stocks that six brokerages have picked as their Diwali bets.
For high net worth investors, Kotak Securities, Emkay Global Financial Services and Karvy Stock Broking also recommended 10-15 per cent allocation to real estate.
“The risk-reward ratio is less favourable for equities after the recent rally. Equities and bonds could underperform, while gold and real estate could outperform in next one year. Massive paper printing will increase supply of currency going ahead while supply of physical assets will be restricted. Based on the demand-supply theory and excess liquidity chasing physical assets, we can expect the run for gold to continue and that of real estate to revive,” said Rusmik Oza, Executive Vice President (Head of Fundamental Research – PCG), Kotak Securities.
In the equity space, Oza likes Bajaj Finserv with a price target of Rs 8,000, Bharti Airtel (Rs 710) and Bajaj Auto (Rs 3,900). He sees Nifty in the 12,500-13,200 range with a median target of 12,800. The 50-share index closed at 12,461 on Monday.
G Chokkalingam, Founder, Equinomics Research and Advisory, advised avoiding real estate for the investment purpose unless it prices drop 10-to15 per cent. He advised 10 per cent allocation to gold, 40 per cent to fixed income securities like safe bonds and bank deposits and the balance 50 per cent to equities.