Hello Readers!
The Union Budget for the fiscal year 2021-22 is out now. Many sectors like healthcare, railways, and roadways, received a good package for their development in the next five years. The large sum package released for these sectors has truly highlighted the intention of infrastructure development of the Indian government.
If we talk about the tax system, the government came up with no big change, however, Budget 2021 has many implications for your investment portfolio. In this scenario what comes to your mind is how to prepare your investment portfolio and if you already have one then how to revise that portfolio.
Here’s how you should approach your investments, for the rest of 2021.
Equity Market Rally Doesn’t Mean To Gamble!
After the budget was tabled in the Parliament, the NIFTY and SENSEX started showing rally in the market. Between January 29 and February 3, the Nifty index rose 8.47 percent. The market that started recovering towards the latter half of last year got a boost in their recovery after the budget was tabled in the parliament.
Experts say that after the Unlock phase stated, the companies were open, and the work was again on track and so the recovery was. A pro-growth government is keen to spend on infrastructure & core sectors and low cost of funds for corporates. These all will have positives outcomes for stocks in the medium term.
Over the last one-year, mid-cap funds gave 23.31 percent returns. Small-cap funds delivered 25.78 percent returns, while large-cap funds gave 21.53 percent, as per the data presented by Value Research.
With the rally in the market, investors have either started investing more and more lump-sum or have started redeeming their fund. However as per experts, “Whenever there are market corrections, deploy small lump-sums. Else, it’s best to stagger your purchases in multi-cap or Flexi-cap schemes”. Budget 2021 is all designed to promote the growth of India, but for beginners, still, it is advisable to keep themselves away from thematic mutual funds”.
Now investors who are thinking to redeem their investment because there is good profit, then I would advise instead of that stick to your asset allocation.
Rishiraj Maheshwari, Founder, and CEO, RISCH Wealth & RISCH Family Office said, “The best approach is to stick to asset allocation. You can take some profits if your asset allocation pattern demands so and allocate that money to other asset classes such as gold, which are undervalued, in line with your asset allocation based on your risk profile”.
Interest Rate Cuts May Soon Come To An End!
Interest rates have been cut down continuously by the RBI, this has stopped investors from investing in bond funds, but after budget 2021, it is expected that the lowering of interest rate will come to an end soon.
The government borrowing plans for the financial year 2021-22 outlined in Budget 2021 has meant that interest rates may begin to rise eventually.
Experts advised not to sell your debt funds, even after the interest rate rise. Lakshmi Iyer, Chief Investment Officer-Debt, Kotak AMC says, “It is important to stick to your intended investment horizon to ride through the volatile phase, there is ample liquidity in financial markets and Reserve Bank of India is expected to take time before hiking rates”.
Gold Price Declined!
In the last 6 months the yellow metal, lost its domestic prices by 10.3 percent. Certainly, its performance has subdued in the recent past. Thus, to solve the issue, the government came up with some provisions for gold in Budget 2021. It proposed a cut in customs duty on gold to 7.5 percent from 12 percent. It further imposed agriculture and infrastructure development cess on imported gold.
Financial expert Shah says, “Government proposal to cut down custom duty on gold has dropped down the value of gold. However, in the medium term, gold prices should appreciate due to ample liquidity in the financial system and gold’s ability to act as a portfolio hedge in uncertain times”.
Generally, in this scenario, it is advised to allocate around 5 to 10% of an individual’s investment in gold. Or opt for gold exchange-traded funds (or gold fund of funds if you do not have a Demat account) or sovereign gold bonds.
Investors Ask, What to do?
It is advisable to investors, instead of looking for where the market goes from this stage, asset allocation must be your base to decide anything further. Do not book profits but use market-movements to re-allocate your assets.
For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).