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Here’s what investors should now do with markets at record jighs

Alpha Strategist by Motilal Oswal Private Wealth has suggested that the strategy for Equity is to invest 50% in lump sum and 50% in a staggered manner over the next 3 months in Multicap strategies and select Mid & Small Cap strategies (MFs, PMS, AIF).

According to the report, 70% – 80% of the Fixed Income portfolio should be biased towards high quality short to medium term accrual strategies with minimum investment horizon of 3 years.

“Within the above allocation, 20-30% can be allocated towards long maturity and high quality roll-down strategies,” the report has said.

Outlook for equity markets

According to Motilal Oswal Private Wealth Equity markets continued the strong uptrend on both absolute and relative basis to global peers in September.

“In CYTD’21 Nifty is the best performer globally with 26% return in INR terms. In the month of September broader markets made a comeback too with Nifty Mid cap/Nifty Small Cap closing 6.9%/6.1% higher outperforming Nifty which closed 2.8% higher.

Global equities ended mostly lower on the back of rising bond yields amid rising prices, and China’s power and realty sector crisis. MSCI World Indices/EM closed -4.5% and -5.6% lower respectively,” it has noted.

Markets look expensive

Equity Market looks expensive on a trailing basis compare to historical average, however, on forward basis it seems to be near slightly above its historical average. Nifty’s 12-month trailing P/E of 27.7x and P/B of 3.7 is at a 35% and 28% premium to its LPA of 20.4x & 2.8x respectively. While Nifty’s 12-month forward P/E is 15% above LPA.

Motilal Oswal Private Wealth Equity markets has crafted a unique model, Temperature Gauge, based on the Motilal Oswal Valuation Index. MOVI is basically an index which is calculated based on the Price to Earnings (PE), Price to Book Value (PB) and Dividend Yield (DY) on the components of Nifty 50.

Using FY22 projected EPS for Nifty 50, the temperature gauge index is in the range of 120-125. Whenever Temperature Gauge Index has been at the levels of 120-125, the forward returns shows a higher probability of positive returns.

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal Institutional Equities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

BI’s Sovereign Gold Bond (SGB) scheme 2021-22 – series VII opens today on Monday, October 25, that will be in operation till October 29. For the upcoming 5 days, investors will be able to invest in the RBI SGB scheme, and the date of issuance is November 2, 2021. The issue price of SGB VII has been fixed at Rs. 4,765 per gram. The nominal value of the bond will be based on the simple average closing price of gold, published by the India Bullion and Jewellers Association Ltd (IBJA), for gold of 999 purity of the last 3 business days of the week preceding the subscription period. Sovereign Gold Bond (SGB) is a virtual form of investment in 24 carat gold.

Should You Invest In The RBI’s Sovereign Gold Bond (SGB) Scheme Now?

At the present Indian market, 24 gold rates are being quoted between Rs. 4760 and Rs. 4770, in October. One should remember that in the last month in September, 24 carat gold rates started with Rs. 4738, which ultimately dropped to Rs. 4549, at the end of the month, with a 3.99% fall in the Indian gold price. But September has been a very concerning month for gold rates, due to a recovering US economy. October has been in a better position. But certainly, when an investor would like to invest in gold, he/she would like to wait for a time when gold rates will be down.

Here comes the question of the US Tapering timeline. US Fed Chairman Jerome Powell is being hawkish about the tapering timeline and he might announce tapering in the first week of November, which is not very far. With tapering, US Government Bond Yield will hike and gold rates will eventually fall significantly.

So, if somebody wants to wait for Powell’s comments and he/she will have to wait till November. The prices are expected to fall. Now the gold rates in the international markets are staying around $1770-$1800/oz, which can drop in November. With the concerns of high inflation rates, the gold rates are heading north now.

RBI’s next Sovereign Gold Bond (SGB) scheme 2021-22, that is series VIII, will be in operation from November 29 to December 3, 2021. So, that is the end of the month. The gold market is a very volatile market, like other commodity markets. So, the fall in gold rates is only anticipated, not confirmed. The global economy and US economy will be the determining factors.

(Also Read: Why Investors Should Put Money In The Sovereign Gold Bond Scheme?)

However, Investing in the RBI’s Sovereign Gold Bond (SGB) Scheme is a far better and wiser mode of investing in gold than investing in physical gold, because the investor does not need to store the gold personally. Hence, no concern of theft will be attached to it.

What is RBI’s Sovereign Gold Bond (SGB) Scheme?

RBI’s Sovereign Gold Bond (SGB) is a government bond or security that is considered against virtual gold. If an investor buys an SGB, the investor will be given government security by the RBI, while the central bank will store the physical gold in its vault. Additionally, SGB offers, a fixed interest rate of 2.5%, payable half-yearly, which will be paid on the scheme’s maturity along with the principal amount. The investor will have to wait for 8 years for the maturity of the bond to redeem the cash or get the physical delivery of the gold. One can also trade SGB in the secondary market.

Sovereign Gold Bond (SGB) is a wise investment tool with a long-term outlook. The need of diversifying the investment portfolio, is one of the best commodity options, to keep a hedge against inflation and uncertainties.

What Is RBI Sovereign Gold Bond (SGB) Scheme? Benefits And Upcoming Tranches, 2021-2022)

(Also read: How To Invest In The Sovereign Gold Bond Scheme Recently Issued By The RBI?)

Opinion

Chirag Mehta, Senior Fund Manager, Alternative Investments, Quantum AMC told media, “Gold’s bread and butter have been the ultra-accommodative monetary stance of global central banks and that is starting to normalize as economies open up and the pandemic fades. But over the next couple of quarters as global supply chains disrupted by the pandemic try to keep up with rising demand, rising inflation could be a drag on growth. Thus, gold’s utility as a portfolio risk diversifier and an asset that tends to keep up with inflation could come to the fore. Consumer demand is also coming back as the Indian economy continues to recover, supporting gold prices.”