Friends – 2019 has been the second year in a row when most investors were clueless.
Right now, it is very difficult to even relive that week of optimism when BJP came back with a thumping majority.
This year, the Sensex has given appx 15% returns- the mid cap is about 3% down and the small cap index is about 8% down.
Most investors that I know of have got around 8% or less at a portfolio level.
Gold gave 20.8% returns – but most of us missed it as we did not see it coming.
Gilt funds gave around 12% – the RBI actions of reducing the repo rate was visible to all and some made the prudent decision to invest in safe Gilt funds.
Real estate was surely a tough market – most builders struggled with cash flow problems. Those who could manage their cash flows – gained market share. As an investor, anyone who had bought an apartment or house in the last few years has not seen much appreciation. Investment in urban land was probably a better option in the last few years.
Having lived through these conditions- where do I see opportunities in 2020?
I believe that this year, due to political compulsions in the US, the global trade wars will be subdued – that will help global trade stabilise.
It would also mean that global growth would be a notch higher.
It would also mean that the US Fed would not reduce interest rates as aggressively as 2019 and RBI would also follow suit and be less aggressive in rate reduction.
A general sense of stability – hopefully a more reformist budget could take the markets up.
In this situation, I would look at companies where top line growth in 2020 is likely to be better than the past three year top line CAGR – for example TCS, HUL, Hawkins, Jubilant food, Asian paints, ITC, Bata India, Dabur, Havells, UB, Sundram Fasteners etc have seen a higher top line growth is 2019 vis a vis the average top line growth in the three years before that. I believe that this criterion of sales growth can help us find winners in 2020.
Equity mutual funds should start performing in 2020 after years of below par performance – it would be best to look at funds with large AUM in any category that you want to invest.
I do believe that the interest rate reduction will be more gradual and hence if one is looking at debt funds – then short-term debt funds is the place to be –one must avoid debt funds that invest in long term corporate debts.
I believe gold will not give great returns in 2020. With lowering of global trade tensions – gold prices globally will go down and that will mean the prices in India also will go down over the next few qtrs.
Real estate is an area where I would recommend urban land or rent bearing commercial real estate – I believe that there is over supply in residential real estate right now and the prices will be subdued – so if you are investing now – then it may be a worthwhile to negotiate hard and invest – but the revival in prices is still a few more qtrs away.
So here are my thoughts on 2020. Please do share your thoughts in the comments column below.