The world’s largest democracy, India, has just seen an end to elections in four states but the royal rumble of 2014 is still left. FIIs have already taken a spectator seat till 2014, unwilling to bet heavily on Indian political dynamics. Meanwhile, an upsurge of the opposition in the exit polls of the state did gave markets their share of jubilance. The benchmark Nifty has been charging higher thanks to the strength shown in Indian Rupee and the positive sentiments build on the expectations that the ruling government will not be coming to power next year.
Amid all this, what should be stance of an investor who has to take all the factors into consideration? The major options in investment are Gold, Equities, Real Estate, Commodities etc. Before parking the funds, other aspects like risks and rewards should be analyzed properly. Lastly, there are individuals who have already invested in some or the other products. The broad classification of the probable opportunities and risks associated with the same has been given below.
The most luring commodity for Indian investors has not seen the same response this year. The attractiveness was jaded after a series of custom duty hikes, which is now at 10%. Above this, one has seen strictness from the RBI in relation to the KYC norms. Amid all this, imports of Gold from illegal routes like Bangladesh, Singapore, Hong Kong, and Dubai has increased.
Internationally, Gold prices breached $ 1250 per troy ounce on COMEX platform. A further fall in prices cannot be ruled out due to the calls of Federal Reserve tapering of $ 85 billion stimulus program. Meanwhile, Indian Gold prices have not moved in tandem with international counterparts due to weakness in Rupee all this while.
With more clarity emerging after the state election results, INR is expected to show some resilience against the US Dollar. This will impact Indian Gold value, which is currently near Rs 29k per 10 gram level. Therefore, those who had invested in this commodity should start looking at some of the other options such as Real Estate.
Real Estate Option:
It can be termed as a good prospect for people who want to buy property. One can ask, why? Also, interest rates are at all time high, so how can it be the right time? Please note that real estate markets run on future forecasts. The situation currently is that the developers are wooing potential buyers with loads of offers like no EMIs for coming 2 -3 years, cash discounts, and accessories for the house.
Once the economy starts reviving, and interest rates come down, the negotiation power will be shifting in favour of builders and developers. Real Estate is also dependent on a general mood in the society. More clarity after the elections can change the mood of the markets, which can immediately escalate the price of property. It is better to invest now and wait for the appreciation to happen, than to invest when the prices have already appreciated.
Equity Market Can Perform Better:
Equity markets have started jubilating since the start of October 2013. The major reason for the shift of fortunes was the control on the Current Account Deficit (CAD) that was a headache for the policy makers in last 2 years. The stakeholders can now bet on some fundamentally good stocks, which at the moment are looking to outperform the broader market sentiments. Bet on segments like Pharma, Consumer Durables, and Media can be fruitful in the coming few days. Other sectors like Information Technology have the tenacity for decent returns.
All in all, investing in India is not that worrisome now as it was six months back. This is only dying to the shift of sentiments; some credit should also be given to the government and apex bank (RBI) for taking stiff measures for controlling the Gold imports. No doubt, the market would be more information driven than based on fundamentals before the elections. Therefore, any downward correction in this period should be viewed as an opportunity to buy and make a strong portfolio with diversified asset classes.