Mar 10, 2004|
Poll: Bullishness continues
Investors continue to be bullish on equity markets. This is what the result of a recent poll by Equitymaster suggests. Last week, we conducted a poll on our website to gauge the investment preferences of our audience at the current juncture. The options provided to them were - Debt, Equity and Fixed return Instruments. And the result was an overwhelming majority for investment in equities (77%) followed by fixed instruments (13%) at a distant second while investments into debt could garner a mere 10% of the total votes. Let us consider the probable reasons that could have prompted investors to select their respective options.
Beginning with the 'unfavourable' (debt) investment option, the reason for the lower attractiveness could be the fact that the debt market bullrun has (more or less) come to an end. Gone are the days when double-digit returns (thanks to tumbling interest rates) were the order of the day. Now investors would have to satisfy themselves not only with single-digit returns but also bear the risk of the possibility of rising interest rates, though not in the immediate term. With the government failing, as yet, to control inflation in the promised band of 4%-5% and the investment cycle showing signs of recovery, it threatens to push up interest rates, which in turn would have a negative impact on debt instruments/funds. It must be noted that returns in debt instruments are inversely related to interest rates. However investors could get some respite if the interest rates move up as the yield on the debt instrument would also move upward.
Now let us move on to the second investment category i.e. fixed return instruments. This assured return investment option has made the going tough for the risk-averse investment community (especially the aged class, for whom interest income has always formed an important source of revenue), as interest rates have halved in the last decade or so. However, at the current juncture (month of March), these investments became all the more attractive owing to the various tax benefits available on some of these, which could be as high as 20% in the form of income-tax rebates if the tax-payer falls below the 1.5 lakhs per annum income bracket.
Another traditional reason for investments into fixed instruments like National Savings Certificate (NSC), Kisan Vikas Patra (KVP), various post-office schemes and the good old bank fixed deposits (FDs) is the security of capital owing to the government backing to these. However, while the one big positive for investing in these instruments is the fact that one can get his investments locked in at higher rates in a falling interest rate scenario, getting into these at current interest rate levels and with inflation at 5%-6%, the real return on these investments would be very low.
Going ahead, with India shining bright, the domestic equity markets are also on a roll having more than doubled since the rally began in late April 2003! The euphoria towards equities is what is reflected in the poll also. With the economy slated to achieve a 7%+ growth on an annualised basis, on the back of strong improvement in the agricultural economy, we feel that the Indian growth story could continue for some more time to come. Also the effects of this strong growth will be seen in 2004 as higher income (thus higher demand) reaches the rural population. The improvement in financial performance of India Inc. would further be augmented owing to continuous cost cutting measures being adopted by industry players and the low interest rates prevailing in the economy, which would support investment activities.
To conclude, while we reckon that all of the above assets are necessary in an investor's portfolio, it is the share of each in the overall scheme of things, which is of prime importance. We are talking about asset allocation here, which depends on various parameters including the age of the investor, the investment horizon, the return expected and the risk that one is comfortable with among others. Thus, an investor 'must' work out the asset allocation suitable to his profile for a safe and steady investment portfolio with adequate returns.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Aug 21, 2017
PersonalFN explains the chief factor pushing gold prices up of late.
Aug 21, 2017
One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407