Time to Re-balance Assets

2008-2013. Indian investors have burnt themselves at almost every asset class they invested. We say almost because the carnage in real estate is waiting to happen. The impact is class-neutral and everybody has taken a knock. The HNI has virtually walked away from risk staking to the secure confines of fixed income. Preserving capital has become an investment goal. Is that bad? Not really, if you live in growth-less economies. But, India is the second among nations on the growth metric. And, we are well en route to reclaiming growth. Shying away from growth investing at the bottom of the cycle is definitely not good strategy. Fixed income is certainly not a sole option for a simple reason. As growth returns, we will see government drop rates leading to a sharp dip in returns from fixed income. By the time investors realize that they have no alternative but to take on risk to beat inflation, risk assets like equity will trade much higher. Worse still, they may not be able to sell other assets like real estate. We are headed into a phase of gradual churn when change will set in on our economy. Keeping one’s investment strategy static in a phase of churn is certainly not going to do investors much good. After all, change is the only investment response to change. If change is the only option, it makes ample sense be be ahead of the herd than to follow it.

Conviction anyway comes to everyone. When it comes is what matters.

Invest speak:

Buybacks, open offers, higher dividend payout – these are simple signals from companies of their optimism about the future. While every company may not give out such signals in the market’s most difficult hour, those that do tend to reward shareholders swiftly. This leads to rising confidence among investors about the company and the stock market. HUL rewarded shareholders with a buy back. It had its own agenda of raising promoter stake to 75%. But, it worked in improving the index, stabilizing it and holding it in a higher range. Indian companies have, on the other hand, lost significant market capitalization, exerted significant downward pressure on the Index and kept investors worried. A turnaround in the fortunes of Indian entities is what the markets need if they are to show strength in the coming months.

Focus on asset allocation. Re-balance your investments.

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