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Stock Analysis, IPO, Mutual Funds, Bonds & More

Freedom from choppiness: Equity puts up best show since last I-Day

Sensex and Nifty surged over 11% between August 15, 2016 and August 15, 2017.

, ETMarkets.com|
Updated: Aug 15, 2017, 11.16 AM IST
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Disciplined investing and ignoring the noise is key to success in investing. Since the previous Independence Day, domestic financial markets witnessed several ups and downs in the form of note ban and implementation of the goods and services tax (GST).

Those who did not try to time the market must be sitting on gains. Some of the IPOs even doubled investor wealth in a single day.

So how did top asset classes performed during the past one year and how are they likely to do going forward.

Equities

Benchmark equity indices BSE Sensex and NSE Nifty surged over 11 per cent between August 15, 2016 and August 15, 2017. During this period, the 30-stock pack scaled a fresh record high of 32,686 on August 2, 2017 while the Nifty50 crossed the 10,000-mark in July 2017.

The BSE IPO index surged over 36 per cent since August 15 last year. Salasar Techno Engineering got listed at Rs 259.15 on BSE in July, a 139.95 per cent premium to its issue price of Rs 108. Among other newly-listed companies, CDSL and Avenue Supermarts helped investors to create big wealth in a single day. The 30-share BSE Sensex closed near 31,400 on August 14, 2017, while NSE Nifty was above 9,750.

"It is a bull market correction, which is healthy. We are overall very positive on the market,” Rajesh Kothari, CIO, AlfAccurate Advisors, said in a chat with ET Now.

"I think one should start looking at stock specifics and keep buying at every correction in case probably there might be 3-4% more correction which is possible in that case you add to the equity portfolio,” he said.

Mutual funds

Banking, smallcap, infrastructure and midcap funds delivered up to 28 per cent return to investors in last one year, according to the data available with website Value Research. Over the past 12 months, inflows to systematic investment plans, or SIPs, surged to Rs 4947 crore as of July 30, 2017 from Rs 3,497 crore in August 2016.

The latest initiatives by the government on infrastructure development – especially roadways, railways and airways – gives clear visibility of growth. Also, consumption demand is likely to pick up boosting capex across sectors.
"Consumption is a six to 12-month theme in our portfolios and infrastructure is the 18-36 months theme that we are playing,” said Sunil Subramaniam, CEO, Sundaram Mutual.

Precious metals

Both gold and silver failed to deliver positive return to investors during the past 12 months. The yellow metal plunged 7 per cent to Rs 29,172 per 10 gram on August 11, 2017 from Rs 31,384 per 10 gram on August 16, 2016. Silver lost 16 per cent to Rs 39200 per 1 kg from Rs 46700 per 1 kg during the same period. Of late, geopolitical tensions and soft dollar supported the prices of gold.

On the further movement of precious metals, Tarun Satsangi, ?Head of Commodity and Forex Research, Globe Capital Market, said: "The movement of the US dollar will give further direction to precious metals. If tension between the US and North Korea escalates, we may see a sudden spike in the prices of yellow metal.”

Aasif Hirani, Director, Tradebulls, said, "Gold may be trading in range and may not see sudden spike in price but the present scenario of negative interest rate, increase in demand from Asia, money printing from the central banks is great scenario for gold.”

Real estate

Implementation of the Real Estate Act and government push towards affordable housing kept real estate sector in the limelight all through last one year. The beaten down BSE Realty index soared 25 per cent between August, 2016 and August, 2017. Housing prices increased by an average 10.5 per cent during the January-March quarter of last financial year across ten major cities compared with that in the year-ago period, according to the Reserve Bank of India (RBI).

However, prices increased marginally by 0.8 per cent over the October-December quarter of 2016-17. The index is based on transaction data received from housing registration authorities in 10 major cities —Mumbai, Delhi, Chennai, Kochi, Kolkata, Bengaluru, Lucknow, Ahmedabad, Jaipur and Kanpur.

RERA implementation has seen slow start with 11 states yet to notify final rules, only seven states with functional websites and four with permanent regulators, according to a report by Edelweiss Securities.

Edelweiss said, "Non-serious players may find difficult to adhere to RERA requirements and could exit business. This coupled with GST should help sustain current capital values. We remain constructive on the sector in view of improved transparency and customer confidence coupled with favourable fundamentals.”

Debt/ fixed income

With the eventful last 12 months for the bond market, yields on 10-year government bonds, which had touched 7.16 per cent in August last year, fell to 6.51 per cent at present due to rising bond prices.

Recently, the Reserve Bank of India (RBI) cut its key rates (repo and reverse repo) by 25 basis points, while maintaining a neutral stance, citing softer inflation-growth equation.

Rahul Goswami, CIO of Fixed Income, ICICI Prudential AMC, in a note said, "We believe there is an opportunity for further rate cuts in the next 2-4 quarters. We recommend investors to stay invested in short and medium duration funds and can consider dynamic duration funds as well.”

"If inflation behaves as per RBI’s expectation, we clearly see one more rate cut by RBI before the end of FY18. Those who invested in fixed income on the duration side than we clearly believe this is not the time to book profit. They should continue to ride the interest rate curve in India going forward,” said Lakshmi Iyer, CIO (debt), Kotak Mutual Fund.
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