What will you bet on in 2017?

Equity, debt, bank fixed deposits, PPF... where will investors put their money this New Year? We find out



As 2017 rolls out, so do new sets of resolutions, plans and aspirations, what not. Investors too will have made their wish list and the question uppermost in their minds would be “what is the theme that will help me beat the market and where should I invest my hard-earned money to get the best possible return?”

2016 was a roller-coaster ride and investors felt the heat all through the year on the back of various global economic and political events. After falling in the first two months, the Sensex made a smart recovery from a low of around 23,000 at the end of February to make a high of around 29,000 in September only to give back most of the gains and settle for the year at 26,626.

What will this year be like? BusinessLine spoke to some investors for their take on the economy and their investment plans for 2017.

Demonetisation effect

All the investors queried expect the effect of demonetisation to be hard on the capital markets for the next six months. But they are hopeful that in the long run the nation will benefit because of this and the markets will reach new highs. With expectation of interest rate decreasing further and market reaching intermittent lows before scaling new highs, many investors intend to increase their portfolio’s equity allocation.

Arunganesh Vaidyanathan, a banking professional, says, “With the interest rates in India expected to decrease, I am looking to increase my allocation to equities in my overall portfolio.” This 32-year-old is optimistic on India’s business environment.

Some market participants want to deftly reallocate their portfolio from time to time and diversify between equity and debt to make the best of both financial instruments. Jayakumar N (42), a finance professional, intends to slowly increase his investments in equities over the next six months. “I am planning to shift all my cash and debt portion into equities. Once I think the market has peaked, I will shift it back into debt again,” says Jayakumar.

Ashwin Ramchandran , a business consultant in his early thirties, has a well-defined portfolio allocation. He says, “I plan to invest 30 per cent in public provident fund, government bonds and fixed deposit, 30 per cent in equity-linked mutual funds, 20 per cent in gold ETF and 20 per cent through direct participation in equities.”

Padmanabhan, a software engineer in his early forties, has a relatively high risk appetite. “I have higher disposable income currently. Due to the current volatility, I am planning to allocate about 10 per cent of my 2017 investment in the futures and options market and try my luck there,” says Padmanabhan.

2017 vs 2016

2016 was a truly memorable year for the global financial markets, marked by key events such as oil prices rising sharply after flirting near multi-year lows, Britains voting to exit the European Union, US presidential elections, to the recent OPEC oil deal.

The domestic environment also made the markets equally volatile on the back of developments ranging from the Reserve Bank of India’s war against non-performing assets to the recent demonetisation.

Vaidayanathan expects the Nifty, which fell after testing its previous high in 2016, to recover this year. “I think 2017 will see the Nifty 50 scaling back lost ground and further reach its all-time highs. I also expect interest rates to drop further,” adds Vaidayanathan.

Due to increased liquidity in the banking system, many market participants expect the RBI to lower policy rate further. They expect a favourable 2017 for those who avail credit. “The increase in liquidity in banks will lead to an increase in the Current and Savings Account ratio, which in turn is expected to decrease the cost of funds further. The RBI will cut rates going forward over the next 3-6 months which should counter the effects of demonetisation,” says Jayakumar.

Padmanabhan expects the market to recover in the second half of 2017. “Demonetisation, a move to remove black money, may hit companies’ profits till the end of the second quarter ending June 2017. But beyond that, the markets should revive,” says Padmanabhan.

Sector outlook

Investors expect some sectors to revive faster than others. “ I expect consumption-based sectors to do well as more tax breaks are expected in 2017. This sector has been largely affected in the short term due to the effects of demonetisation, which has reflected in their equity prices. But, given our country’s demographic, this should revive faster than other sectors,” says Vaidyanathan.

Jayakumar feels that the recent clean-up of non-performing assets from banks and a strong multiplier effect that banks have on economic revival should be a good starting point, going forward. According to him, HDFC Bank, ICICI bank, YES Bank and Axis Bank may perform well this year.

The recent OPEC deal and increased emphasis by global players to mitigate the effects of climate change have found many takers for oil and gas and renewable energy stocks. “After the recent OPEC deal, oil and gas sector looks encouraging. Also, renewable energy is impressive because every country looks to cut down on that currently. For example, the stock of Swelect Energy — a leading renewable energy company — looks impressive,” says Ramchandran. “Besides this, I think some mid-cap stocks such as Tata Coffee, Hexaware and Ujjivan Financial Services will do better in 2017” adds Ramchandran.

Surprises on the cards?

No year comes without its own set of surprises. The upcoming Budget will raise the income tax exemption limit for individuals from ₹2.5 lakh to ₹4 lakh per annum, boosting the disposable income in consumers’ hands, says Jayakumar.

By March 2017, the new ₹2,000 note will be demonetised, predicts Padmanabhan.

One thing’s for sure: 2017 is gonna see a lot of action.

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