Where should you invest your money this Diwali? Experts say equities remain the best bet despite the recent volatility.
“People are generally more positive about investing during the Deepavali period,” said Anand James, AGM, Geojit BNP Paribas.
“The markets are expected to touch new highs over the next year,” added Dinesh Thakkar, chairman and managing director, Angel Broking.
James has a one year target of 24,000 for the Sensex, which on Tuesday closed at 20,864 points, implying a 15% growth projection till next Diwali.
There’s reason for this optimism. The government has recently cleared large projects worth `1.86 lakh crore. Clearances for projects worth several lakh crore are expected over the coming months. The full impact of these clearances will be felt only over the next six months to a year. So, infrastructure, metals and banking stocks are expected to do well over this period.
But experts advise investors to follow one fundamental rule: invest only in companies with good managements and resilience of earnings. “Exports are likely to be a strong theme in the coming two years. So, selective picks in pharma and IT make sense,” Thakkar said.
James picked Tata Motors, Hero Motocorp, TVS Motor Company, Punjab National Bank, Yes Bank and Allahabad Bank as companies that are likely to do well over the coming year.
Retail investors with a low risk threshold could also consider fund of funds (mutual funds that invest in other MFs) and select large cap schemes of reputed MFs, he added.
Among asset classes, gold and real estate aren’t expected to appreciate much from their current levels.
However, investors should keep in mind that negative news such as a faster than expected pace of QE3 tapering or untamed inflation or the formation of an investor-unfriendly government at the Centre could cause major short-term volatility. To get good returns, they will have to ride out these storms and wait for the economic upturn to multiply their investments.