As the New Year 2022 kicks in next week, market watchers are advising investors to continue to give more weightage to equity in portfolio allocation despite the double-digits gain registered by the benchmark equity indices in 2021.
The 30-share index BSE Sensex has advanced over 9,000 points, or nearly 20 per cent to 57,124 on a year-to-date basis till December 26. Similarly, the 50-share NSE Nifty index has gained more than 3,000 points, or 22 per cent, to 17,003.
Going ahead, Neeraj Chadawar, head-quantitative equity research, Axis Securities believes that Nifty may hit 20,200-mark by December 2022. On the other hand, Gaurav Dua, head-capital market strategy, Sharekhan by BNP Paribas added that returns in the equity markets are likely to moderate in the year 2022 but still are likely to be in the mid-double digit range given the expectations of strong growth in corporate earnings over the next few years.
“If one applies multiple of 20 times to FY2024 consensus estimates of Rs 960 for Nifty EPS, the target price works out to around 19,000 level on Nifty,” he added.
In general, a couple of factors such as persistent buying by the foreign and domestic institutions, liquidity and improving macros supported sentiment in 2021. On the flip side, the identification of the Omicron variant in late November, and the market’s strong immediate reaction to it, was a stark reminder that the novel coronavirus is a persistent risk.
Meanwhile, Central banks are now making strategic moves away from emergency measures and policy rates. However, at home, the Reserve Bank of India (RBI) has continued with the accommodative stance to restrain borrowing costs rising in the near future.
Sharing his advice with investors on allocating Rs 1 crore next year, Dua said that the golden rule of 100 minus investor’s age is always preferred for investment exposure into equities and there is no reason to change it. Around 5-8 per cent can be allocated to gold and other physical assets whereas the rest should be in fixed income instruments.
Deepak Jasani, head of retail research, HDFC Securities suggested putting 50 per cent of the amount in equity, 20 per cent in gold, 15 per cent each in debt and real estate.
“Equity exposure has been reduced due to the fact that expectations of another year of high return need to be curbed. Gold and real estate can do well, if inflation does not come under control soon. Debt exposure is limited as interest rates may not come down especially in the first half of the year,” Jasani said.
On the other hand, Mitul Shah, head of research-institutional desk, Reliance Securities advised assigning just 25 per cent weight to equities in 2022. “Risk-reward is not favourable in equities, given the sharp run-up in the past few quarters, however, post recent sharp correction equity market is gradually becoming healthy for investment,” he said adding, one can put 35 per cent of wealth in bonds, 15 per cent in gold and the balance in real estate.
While sounding bullish on the Indian economy and markets, Manish Jain, fund manager, Ambit Asset Management said, “We will witness India emerging as one of the fastest-growing economies in the world in 2022 and we shall witness continued strength in Nifty earnings well into the double digits driven by a strong revival in private capex and strong rural demand. We would expect Nifty to be between 19,000-20,000 by December 2022.”
“No debt due to abysmal yields and higher risk proposition. One should keep the portfolio in the ratio of 80:20 between equities and gold,” said Jain.
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