2019 was a year of surprises, volatility and outperformance of select large cap names. A bunch of 12-15 “Quality” names out of the BSE 500 stocks most of the gains. In fact, 2019 can be called the year of divergence and emergence of a “Quality” index within the index.
Equity strategy calls and impact in CY2019
We started the year with 20% underweight call on equities with positive bias on large cap as we expected markets to be trade off on back of expensive valuations, NBFC crisis and political uncertainty.
Fixed income: Year gone by
2019 proved to be a difficult year to explain fixed income performance. While it did bring the expected cheer in the form of a massive 135bps cut in the policy rate by RBI, relative fall in yields being restricted to the short end of the curve and overall credit shock in the system limited the performance to selective segments of fixed income.
Investment outlook on asset classes for 2020
|
Asset class |
View |
Outlook & rationale |
Look out for |
|
Equity |
20% overweight & large cap to midcap at 60:40 |
We remain constructive on Indian equities and maintain our overweight stance with a positive bias towards mid and small cap allocation- based on the valuation gap between large and midcap and aided by global liquidity. |
H1 CY20 earnings |
|
Fixed income |
High quality short term |
We maintain negative outlook on credit risk-oriented strategies with positive bias towards AAA and select AA papers. We recommend active short-term strategies along with high quality roll down funds |
Fiscal deficit |
|
REIT |
Hold |
2019 was a phenomenal year with launch of first REIT of Embassy Blackstone. Aided by declining yields and scarcity premium, the REIT delivered capital gains of approximately 40%. 2020 could see many further good issuances. We continue to remain optimistic as long as interest rate scenario remains stable and benign |
10 year g-sec yields |
|
Gold |
Allocate ~5% of portfolio |
Gold came out of its 7-year slumber and gave 19.70% USD returns in CY 2019. Gold could extend its gains in 2020 aided by global liquidity & pro-growth policies. Geo-politics and overhang of extended trade-war also extend key support to Gold. |
Fed policy actions & Middle East Crisis |
Note: The article has been reproduced verbatim. The views expressed in this article do not necessarily reflect the views of Cafemutual.