‘Time to invest in fixed income portfolios, lock in yields in govt securities’

Market


WealthDesk is a platform that allows users to invest in stocks and ETF portfolios called WealthBaskets that are created by SEBI registered professionals.

In an interview to Mint’s Rakshita Madan, Jain of WealthDesk also talked about Budget expectations. He said there is a need to look at the ESOPs tax structure. If the finance minister can improvise that, it will help the Indian startups.

Edited excerpts:

Q. What is your outlook for the equity market given the macro headwinds like geopolitical uncertainty, inflation, and likely slowdown?.

A. 2022 was a rough ride for the equity markets globally due to COVID-induced pandemic led supply chain disruptions, geopolitical tensions between Russian and Ukraine and the looming risk of a global recession. With global economies projected to decelerate, many believe that 2023 will look like a jittery year. However, the Indian equity market on a sustainable basis is looking attractive in the shorter term as well as in the longer term. One key thing to note here is that the recent corrections in the global markets have made their valuations very attractive too in comparison to the Indian Equity markets.

There is a possibility that FIIs may divert away their money from the Indian Equity markets towards the global markets due to this attractive valuation.

I am very optimistic about the further growth in retail investor participation even amidst the inflation and other turbulent uncertainties.

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We also believe that there seems to be attractive opportunities available in the fixed income segment hence one should also look to build a fixed income portfolio.

Q. Given such a challenging environment, how do you think investors should place their portfolio?.

During the recent Bull Run many new investors came into the market. Most of them made money from stocks which were rising mostly due to the secular bull run, rather than backed by fundamentals.

However, in environments where things become very stock and sector specific, it becomes very important on how one will continue to infuse fresh money into the market. The investors who continue to put their money into SIPs or systematic portfolios should continue to do so as they are doing it from a longer-term perspective. When it comes to direct equities, it is going to be challenging because even the stocks which were doing well will go through some corrections due to the overall macro and micro environment and sector specific environments. This is where I also think some of the investors who might not have the time and the skillset to build their own portfolios, can get into more managed portfolios such as WealthBaskets.

Apart from this, for retail investors, it is actually a great time to invest in fixed income portfolios and lock in attractive yields in government securities, target debt portfolios like government securities, target maturity funds, PSU and government bonds through the ETF route.

I would suggest going a little overboard on fixed income securities as yields have become very attractive. Equity play should be done through staggering over a period of time, with long term play through equities always in mind.

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For instance, if an investor has 60% long term allocation towards equities, this should continue through SIPs in Equity focused WealthBaskets with the right curators over, say, next 6 months. The remaining can be invested immediately in fixed income instruments like target maturity funds, gilt funds or even FDs for senior citizens.

Q. Within the equity market, what are the sectors that you like?.

Sensex and the Nifty witnessed low single-digit gains in 2022. Sensex saw a jump of 4.44% while Nifty 50 gained 4.33%. Many analysts believe that the first half of 2023 will be the same as 2022 due to persisting concerns. Nevertheless, I believe that India will grow at a better pace than many emerging markets due to a strong macro environment. For me, I would say that I will continue to invest in sectors which are built on the schemes of building around PLI schemes. I will also continue to invest in banks, especially BFSI within private banks and large banks as there has been a large overhang in terms of their growth story. The Banking and Insurance specific stocks .ontinue to see an upside due to the revival in economic activities.

Also, the companies which have gone through a major capex cycle will start seeing the impact of that because generally capex is a lag to a company’s future growth. Capex lag may come in the future earnings. So those kinds of capex heavy infra companies .re going to continue to see upside.

Q. What are your Budget expectations as a stakeholder in the market?.

There are a bunch of expectations from the upcoming budget. One is the fact that Financial Inclusion has been a very critical objective for the current government and the fact that recently the cabinet passed for example, an incentive scheme to penetrate RuPay debit cards which I believe was a great move. So, I am assuming that the budget will continue to exercise on that path on financial inclusion whether it is payment, insurance, capital markets, and so on.

Second thing would be that much of these innovations are generally led by innovators who are taking a lot of risk. From a risk capital point of view, I think one of the things which has been an overhang largely in case of a bunch of startups and industry bodies to the government is that they should look at how our ESOPs tax structuring happens.

The point is that even when you exercise you must pay at the current value, the notional value, you have to pay the taxes the same year where you have not made actual proceeds money but still you have to pay the tax.

Q. Any suggestions for the finance minister?.

I think one would definitely be that the way we have created the momentum around a bunch of things where we have been able to achieve Financial Inclusion, we’ve also been able to achieve a great startup environment and the fact a lot of innovation is happening by new-age companies working in the right equilibrium with incumbents, I think the government has done a great job so far and I believe that they should continue to do so.

The risk capital that comes to India is the ease of governance, I think the government is continuously working on that and should continue that. And the fact that especially around financial services, if we create a more agile environment for startups to innovate, where the regulatory aspect needs to evolve very quickly because from an end customer point of view, some of the innovations are very good.

Therefore, regulators should have a quicker and agile way to adapt to that and respond to changing dynamics, whether it is payment side or banking or insurance or SEBI capital markets. I think the government should empower these regulators to work closely to drive innovation where customers are benefited. The government should also be very positive about the web3 point innovation because it should not create some confusion around what is innovative and what is forward looking.


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