In an interview with Varsha Ladewar of myiris.com, Rahul Pariekh, head, ABM My Universe opined, ''The prominent sectors to initiate positions are cyclical like banks, NBFCs, capital goods, infrastructure and real estate and cement.''
How do you see global economic and market outlook?
The global economic outlook looks better today compared to what it was last year. This is due to the fact that the US economy has emerged out of the slowdown and the unemployment rate has come down to 6.10% as against the 1050% in 2007-08. There is a definite recovery in the US economy. It is this recovery that had led to the Fed gradually unwinding the bond purchase program which they had initiated during the peak recessionary conditions. The conditions in Europe has improved as far as the core economies like Germany and France are concerned. Same is the case with UK too. But the peripheral countries like Portugal, Spain and Italy are still going through sluggish economic conditions. The ECB has reduced the base rate to near zero, 0.05%, with the intention of supplying easy liquidity to business and industry. Broadly in the US and UK and for most of Europe economic conditions remain encouragingly upbeat , though we may not see any major arte action leading to higher interest rates at this juncture. The Chinese economy is not expected to slip any further and may see the economy reviving over the next four quarters. So overall the global economic outlook is of relatively stable economies, not much of price pressures due to falling commodities prices and low inflation levels. One may see gradually rising interest rates in the US whereas Europe will continue to be in a soft money policy at least for another four to six quarters.
What is your take on Indian markets? Are you bullish or bearish on Indian equities currently?
Bullish and bearish phases are characteristic of all markets, especially, financial markets. Markets move up and down in response to economic and financial events and developments. Investments should happen irrespective of these cycles of economic activity and that is important for long term wealth creation. The Indian equities offer a unique opportunity to create wealth as it is in a secular bull phase characterized by reviving economic growth, likely pick up in corporate earnings, a positive and optimistic environment created by the stable and reform-oriented government etc. All these will get translated into better performance on the equity markets in the coming years. The markets in terms of valuation is staying close to its long term average valuations. Given the prospects of growth rate likely moving up from the current levels of around 5% to around 8% over the next three to five years the amount of value that equities can create is phenomenal. This is the time for investors to participate and gain from the markets.
Which sectors will likely to outperform or underperform from here?
The prominent sectors to initiate positions are cyclical like banks, NBFCs, capital goods, infrastructure and real estate and cement. We may see reforms-led rally in oil and gas, power and media. Structural changes will drive the demand for agri-equipments. Demand for automobiles is also another factor to reckon with. Short term underperformers but long term performers are FMCG, IT and Pharma
Give your advice on personal finance to our readers.
''Make your money work for you'' is a one line advice that I would give to every reader. Personal Finance is the most important yet the most neglected part in our daily routine.
To start with, plan your income into 3 separate components - Spending, Saving & Investing. Use the golden rule of ensuring that your Spending = Income - Savings/Investing and not the other way round. This will ensure disciplined savings and investing which will ensure creation of net positive wealth over longer term. Follow the below steps to get your Personal Finance in shape:
1. Savings is for short term needs whereas investing is for medium to long term needs.
2. Create an emergency fund which will cover 3 to 6 months of your monthly expenses.
3. Get your life cover & health cover in place to protect your family from loss of life or loss of income during medical emergency.
4. Plan your finances as early as possible. It is not enough that you plan your savings but plan your investments too. The purpose of investments is to beat inflation and create net positive surplus so ensure that the money is allocated properly based on risk profile and goals (retirement, child education etc.). There are only 2 things which work in long term wealth creation through investing:
a.Magic of compounding so invest early and invest as much as you can to put your money to good use through combined.
b.Ensure disciplined and regular investing based on risk profile based asset allocation.
5. Finally once the investments are planned, one should look at liabilities management and tax management if applicable.
6. Last but not the least, one needs to ensure that the will is in place and registered so that in the event of untimely death; the asset transfer is smooth. All this requires deliberate efforts to assimilate and implement the financial blue print that one has devised through personal financial planning.
Do you see any investment opportunities at present levels?
For a long term investor who makes investments to achieve his financial goals and objectives, and create wealth, the financial markets continuously offer opportunities. The equity market offers an opportunity to create long term wealth against the background of the growth story that India presents. Even within equities there are a number of specific opportunities, however long term disciplined investments through SIPs in well managed diversified equity funds and balanced funds (tax advantage on debt component). With a time horizon of anything from three to five years the market offers immense opportunities to those who make investments in a graduated fashion through SIPs or buying on dips. It should not be forgotten that there are opportunities in the debt space too. With the probability of interest rates moving down, over the next six months to one year very high, short term debt or duration fixed income products too offer a good avenue to invest for longer term gains, albeit with slightly higher risk.
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