Avenues to park money
Gold and real-estate look
better than equities at
this stage. Debt funds
and bank deposits may
tur...
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Gold and real-estate look better than equities at this stage: Rajnish Kumar

Rajnish Kumar (Head, Fullerton Securities) Source: Hindu Business Line, 24th October'10
Published on: Mar 4, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - Gold and real-estate look better than equities at this stage: Rajnish Kumar

  • 1. Avenues to park money Gold and real-estate look better than equities at this stage. Debt funds and bank deposits may turn more attractive as credit growth picks up and interest rates harden further. RlflishKIlIIInr One of the toughest decisions that an investor faccs today is ‘where to invest? ’ The Sensex is back at 20.000 levcls. gold recently touched its all-time high and property titles are back to pre-crisis days. With equities. gold. property. all haying seen :1 significant nin~up from their lows in 2008, asset prices are no longer cheap. Besides. inflation has been consistently high and interest rates subdued. making bank deposits unattractive. Here is an evaluation of each of the investment opportunities. GOLD WILL KEEF SHINING There has been a dramatic rise in gold prices in the last five years. in Novem- er 2005. gold breached $500 to an ounce mark for the first time since 1087. Since then, it has moved upward to II lifetime high of 51.387 in October dri- ven by a softer dollar as also by the negative sentiments on economic growth. Unimpressive economic data from the US in recent times has raised expec- tations that the US will keep interest rates low for an extended period. It is also likely to extend its quiintitzitivc easing programme to fight off reces- sionary trends. This is good news for gold as a continuation of this trend would mean that inflation could rise and triger greater investment in gold as it is historically seen its a hedge against inflation. Besides. demand for gold in key mar- ltets of India, where the festival season lion. and in China, which is liberalising its gold markets. is likely to rise in the short term. Coupled with this. the fact that central banks have sharply re- duced sales of gold (as gold's attractive- ness as in reserve asset has increased) should be good for gold prices. Overall. in these uncertain times. gold still looks like a hedge against in- flation with potential for good rciums. India has been witnessing increased fl0R'§ {YOU} O‘L‘l'SE1I§lI'l‘€§k0I'$ lll fC‘C€l“ times. In the short-term, markets could be impacted by volatility in the global markets and the spate of issuanccs in the coming months. According to the IMF. global growth is expected to slow sharply in 2011 as developed economies slush their budgets amid slow economic recovery. EQUl'|1ESVOLATIL£ However. emerging markets such as China and India are predicted to re- main growth champions. The IMF ex» pccts Asia’s developing economies to expand 9.4 per cent in 2010, compared with a growth of 2.7 per cent in ad- vanced countries. The Indian economy is expected to revert to its high growth phase of0.7 per cent in 2010 and 8,4 per erior returns. cent in 2011. Going forward. the expect- ed loose monetary policy of the devel- oped world. the appreciating emerging market currencies and strong growth outlook of these markets is expected to keep the fund inflows strong. Hence. given the strong fundamen- tals, lndian stock markets are a good bet in the long run. But, as current highs are being driven by I-‘ll flows, there will be high volatility in the markets and re- turns may not be worth the risk. If you have the appetite to ride the roller» coaster and take a long term view. there is no reason to shy away from equities even at these levels. REAL ESTATE IN HIGH D$AND India leads the pack of top real-estate investment markets in Asia for 2010, according to a study by I’ricev: iterhou- scCoopers (Pwtil and l'rhan Land In- stitute released in Dccembcr 2009. The report indicates that Mumbai and Delhi in particular are good real-estate in- vestment destinations. Residential properties are viewed as more promis- ing than other sectors. Rising incomes in urban India and especially in the key markets of NCR. Mumhai and Bangalore, means proper- ty is probably more affordable today than before inspite ofhigh prices. With robust growth in demand for residen- tial properties, Indian property still re- mains attractive. But with property prices back at pre- crisis levels in most of the key niztrkcts. the question foremost in every inves- tor's mind is whether there is an asset bubble forming in the real-estate surc- tor. Unlike China. India has not seen huge inflows of overseas funds into the property market overheating the mar- ket. However. do not expect to make astronomical returns of the past as pric- cs are not likely to grow rapidly from these levels. FIXED INCOK The RBI seems to be at the fagend of its rate hikes and the market expects it maximum of another 50 basis points hike. This will also mean we are nearing a peak in interest rates. However. in- flation has been above the RBI target of 6 per cent and is likely to remain so well into 201i. Bur real returns from Indian bonds have been negative for .1 good part of this financial year and have become marginally positive only now. Fixed incomc MI’ and bank deposits are not likely to give zi return that can handsomely beat inflation and that's why investors are chasing higher risk assets such as equities. real-estate and commodities. However. this asset class remains important from an asset alloca- tion point of view. In this c.1tt-gory. in- vest only for the safety that you need from an asset allocation perspective. It is expected that returns will remain on- attractive for at least the next one year. In conclusion, gold and real-estate look better than equities at this stage. Debt Funds and Bank deposits may turn more attractive as credit growth picks up and interest rates harden further. The writer Ii £. l?(l. lll‘t’ l‘Ice-President. Fullcrrtvn st-runzm um! II‘. -aith .41»-u. -rt

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