Moving into 2019 we can expect global uncertainties to continue. The US-China Trade War, protectionist moves from various economies, volatility in global energy and metal prices, and disruptions in businesses on account of technological progress or regulatory changes are going to be the dominant themes going forward. In this rather volatile and uncertain environment, your investments have to be diversified and well thought through. Downside risk protection should be given more importance than upside gain potential. Given this backdrop, here are my 5 investment ideas for this year:
After several years of range-bound movement, this precious metal is finally getting its lustre back. Movements in gold usually last for a few years. Moreover in times of uncertainty and fear, money moves to safer assets like gold. Hence, gold can be a safe place to store your wealth in 2019.
2. Stocks of Corporate Banks
Last few years have seen a huge divergence in performance between banks with retail focus and those deriving income mainly from corporate lending. Given the background of rising NPAs, stocks of public sector banks as well as private banks having large corporate loan exposure were dumped aggressively by smart investors. On the other hand, buoyancy in consumer finance helped NBFCs as well as private banks with retail presence to do very well. This trend is now reversing. NBFCs and some private banks are witnessing profit booking and money is moving towards corporate banks on news of various measures being taken on NPA resolutions and cleaning of balance sheets of public sector banks. Private banks facing NPA issues have also got new CEOs and are rapidly resolving their balance sheet issues. All this means that corporate banking shares which are trading at multi-year lows are set to continue rallying this year.
3. Stocks of Capital Goods Sector
After years of underperforming the broad indices, capital goods sector is getting back its momentum. There are early but visible signs of Capex revival. Being an under-owned sector and having given next to negligible returns over the last several years, this sector has relatively low downside risk and huge potential on the upside. Moreover you have plenty of very well-run blue chips in this sector to chose from.
4. Real Estate Stocks
Real estate as a sector is likely to remain subdued for some more years. However, real estate stocks have emerged as a very lucrative investment opportunity. This is on account of massive clean up this sector has witnessed over the past few years. Now only the serious and well established players having a robust, sustainable business model survive. Since the market for real estate will anyway expand, fewer players automatically translates into better prospects for them. Moreover, with the Real Estate (Regulation and Development) Act (RERA) firmly in place, the growth in real estate would now be more solid and sustainable. Also, again this sector has underperformed and valuations are attractive.
5. Income schemes of Mutual Funds
With very low inflation levels and declining crude prices, the interest rate cycle has certainly peaked here. Hence bond prices can be expected to rally at some point in the future. This too has not been a very favourite sector amongst the investors and has limited downside risk.
(By Ashish Kapur, CEO, Invest Shoppe India Ltd)