Tread cautiously on consumer goods as the risk-reward seems unfavourable.
2012 has seen a 25 per cent gain in the equity market and 50 per cent-plus gains in many stocks. Should investors now sell? We are asking from the standpoint of a young 30-year old investor.
Investments in equity as a proportion of financial savings have reduced considerably in the last five years and it is time for portfolio rebalancing. With macro indicators, including the GDP growth rates, showing signs of bottoming out and structural positive changes in the economy, the visibility of India story doing good over the next 3-5 years is better today than any time in the last few years. From a young investor’s perspective, risk-reward is favourable for investing in equity.
Could you describe two sectors that delivered very good returns for your funds in 2012?
Private banks and cement have been our top performing sectors for the year. We were quick to read the situation on the ailing banking sector and build positions in private banks, which were retail-focused and hence had considerably less asset quality risks over public sector banks. Cement is another sector which helped us through the year. We liked the sector’s ability to cope with a challenging year through stable pricing and improving profitability.