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A recently released Alpha Strategist Report 2024 by Motilal Oswal Private Wealth said that multi asset allocation strategy should be considered a superior alternative to fixed income due to its investment in equity, debt and gold.
The report also recommends a staggered investment strategy across market caps for the next 6-12 months.
Here are the key highlights of the report:
India continues to be a bright spot
Despite the fears of recession in the US markets and political turmoil due to wars, India continues to be a bright spot and is expected to be the fastest growing economy this year. The Profit After Tax (PAT) growth has been 22% between FY19-24 while the total market cap of these companies has also grown at a comparable rate. Earnings growth of these companies is expected to be moderate in the upcoming future.
Fixed income investment strategy
The yield curve in the fixed income market has started to gradually steepen due to favorable demand-supply dynamics and controlled inflation. Debt securities with 1-3 year maturity are trading at yields lower than those with maturity above 10 years. RBI is likely to maintain the interest rates.
Equity investment strategy
The Price to Earnings (PE) valuations are fair for large cap while mid and small caps are comparatively expensive. Investors with adequate amount of equity allocation can continue to remain invested. Investors who feel that they do not have equity allocation at the desired levels should follow a staggered investment approach over 6 months in large and multi cap and over 6 to 12 months in mid and small cap with accelerated deployment in the event of a major correction.
Commodity investment strategy
Silver has a strong demand outlook due to industrial demand boost, boost in manufacturing and industrial activity in China and growth potential in green tech.
Meanwhile, gold is suggested as an important asset class for strategic asset allocation during the times of volatility.
Liquidity management
For liquidity, investments can be made in floating rate and arbitrage funds.
Portfolio strategy
The report suggests a 30% allocation in actively and passively managed duration funds, 30-35% allocation in conservative multi asset allocation funds through a combination of domestic equity, arbitrage, fixed income, international equity, gold and other commodities. The rest 30-35% in a combination of private credit strategies, REITs, InVITs and select high yield Non-Convertible Debentures (NCDs).
