By the end of 2018, while the Nifty50 gained a mere 3.5 percent over past one year, the mid-cap index and Nifty small-cap index lost 15.45 percent and 28.59 percent, respectively.
The divergence between the large-cap stocks and the rest of the stocks, made many investors turn risk-averse. Although investors continued with their systematic investment plans (SIP), the outcomes varied. Investors who stuck to large-cap funds managed to float with relatively lower return compared to previous year. Those investing in small and mid-cap funds burnt their fingers.
Global factors will influence the Indian stock markets in 2019. The fall in crude oil prices from a high of $85 per barrel to $53 per barrel is a big positive for the Indian economy.
If, as a result, foreigners withdraw money from emerging markets, such as India, which are typically referred to as developing and high-risk markets, the Indian rupee and equity markets would be impacted.
The Reserve Bank of India (RBI) raised interest rates in early 2018 by 50 basis points, but in the last monetary policy opted to change its expectation of inflation.
The monetary policy committee of RBI cut its inflation forecast for September 2018 to April 2019 period to 2.7-3.2 percent from 3.9-4.5 percent earlier.
Falling interest rates – an opportunity to seize?
Low interest rates offer an opportunity for those who seek some sort of a regular or fixed income.
He advises investors to stay with short-term bond funds, as government securities (gilt) funds and long-term bond funds have already moved on the back of a sharp fall in the bond yields in recent past. If capital protection is important, opt for fixed maturity plans and traditional avenues such as fixed deposits and small saving schemes at current yields.
Will gold finally glitter?
Though the stock and bond investors have their own reasons to frown at their investments, the surprise in the pack was gold. Investors in gold benefited in 2018.
Spot prices of gold prices moved up 8.5 percent over past one year on the back of rising global uncertainty, trade wars, rising oil prices and a weak US dollar.
Many investors, though, had stayed away from gold on the back of poor returns that it had offered in the past five years. According to the Association of Mutual Funds in India, gold ETFs saw a net outflow of Rs 280 crore since April 1, 2018.
Consumption of gold in India and China are also major drivers of gold. In India, since all the gold is imported, weak rupee accentuates gold prices. Given the expectations of an increase in geo-political tension in CY19, the gold prices are expected to remain firm.
Despite a temporary truce in trade wars, the threat of trade wars have not disappeared. Gold, as an asset class, does well in uncertain times.
IIFL expects COMEX gold to touch $1,450 per ounce, while for MCX gold, his target is around Rs 35,500 per 10 gram. Continue your asset allocation and ensure at least around 5-10 percent of your portfolio is in gold.