‘Global listed equities is one asset class, which we think, most Indian investors are under-allocated to or, rather, most are not even aware of’ informs Dr. Vikas Gupta, CEO & Chief Investment Strategist at Omniscience Capital.
Team NewsBarons connects with Dr. Gupta to understand the investment options that can present healthy returns in 2021.
NB: What is your outlook on the market, can we continue to have similar momentum in 2021.
Vikas: While we do not speculate on market levels, we do look at fundamentals for the economy and the companies, and those look quite strong. The nominal GDP growth rates for India for Calendar 2021/FY22, as forecasted by various agencies, government and non-government, domestic and international, are in the range of 15%-20%. A similarly strong nominal GDP growth rate of around 12-15% is expected to continue for the year after, i.e. Calendar 22/FY23.
Forecasted company earnings for FY22 are in the range of 25%-30% followed by 15%-20% for FY23. With such strong growth in the economy and corporate profitability, combined with low interest rates domestically and globally, and no known events which could cause uncertainty, the sentiment is likely to remain positive. Chances of surprises on the Covid front is also unlikely with the wide availability of the vaccine.
It is probably a good time to continue investing in a selective manner in a SuperNormal Portfolio of SuperNormal Companies @ SuperNormal Prices.
NB: What is your take on Gold investments, Real Estate & Cryptocurrency?
Vikas: We think Gold does have a place in a multi-asset, diversified portfolio. However, it need not be more than 5%-10% for most portfolios. Further, most Indian families, probably, already have much more gold in their assets in the form of family jewellery. Similarly, Real Estate is something which most families are overallocated to.
Cryptocurrencies cannot be classified as true assets. While Gold has worked as a storage of value and medium of exchange over thousands of years across different cultures, it is because of its rarity. Same cannot be said about cryptocurrencies. While each cryptocurrency can have a limited issue size, there is no limit on launch of new cryptocurrencies. Currently, there are more than 4000 cryptocurrencies. In our opinion, it is best avoided by most people.
NB: Would you advice investors to look at Global Investing?
Vikas: Global listed equities is one asset class which we think most Indian investors are under-allocated to or, rather, most are not even aware of. We think most investors should have some allocation to US-listed equities in their portfolio. The US economy contributes around 25% to the World GDP and the US stock market contributes around 35% to the global market capitalization. US-listed companies get around 40% revenues from non-US markets, i.e. other developed and emerging markets. In our opinion, that makes it is the single market one can invest in and get exposure to rest of the world.
Under the LRS (Liberalized Remittance) scheme of RBI (Reserve Bank of India), each Indian can remit up to $250,000 per year for investment purposes. This amount can be invested in a SuperNormal Portfolio of selected US-listed companies. With investments possible in fractional shares in the US markets, it is now possible for even small ticket investments, say $1000, to be invested in a SuperNormal Portfolio. For example, our Omni Supreme US and Omni AIoT portfolios are available on stockal.com and investors can easily invest in those portfolios. Of course, this is not investment advice; each investor should look at their investment objectives, investment horizon, risk profile and product suitability before investing in any product or asset class. But the point is that global investing is now accessible and available for all.
NB: What’s your expectation from the upcoming Union Budget?
Vikas: We expect that this budget to announce several path-breaking reforms. But let us wait and see. What is quite likely is focus on infrastructure, i.e. roads, railways, and power. We expect a strong allocation to Defence as well. Railways is likely to see several interesting announcements with longer-term impact. Reforms in power-sector are also expected. Encouragement of capital investments through some form of tax benefits is also likely. We also expect several policies to encourage exports.
NB: What is your advice to investors on investment strategy for 2021.
Vikas: We think, investors should continue allocating to Indian and US equities. Fixed income is unlikely to provide high yields and hence investors who can tolerate equity risk should explore more allocation to SuperNormal Dividend paying companies. Earlier, equity allocations could only take place through mutual funds or buying single stocks directly. Now with the availability of a new asset class—the OmniScience smallcase—an investor can add this to their asset allocation. OmniScience smallcases are higher risk-reward asset class compared to mutual funds, while being much safer than investing in single stocks. Some OmniScience smallcases, such as, Omni Superstox are fully diversified portfolios which can even substitute for a mutual fund allocation. These are PMS/AIF-style, long-only, strategies but are now accessible to all investors at low ticket sizes around INR 1 lakh or lower. On the omniscience.smallcase.com platform, there are a number of thematic strategies as well which can be used for satellite allocations to high-growth potential themes. Further, SIP can be carried out in most of these portfolios.
NB: What should an investor’s portfolio look like?
Vikas: Of course, there can be no one-size-fits-all portfolio. However, for most investors in a stable job, with no dependents, except their immediate family, in their mid-30s to mid-40s, they can allocate a significant amount to equities, say 50%-80%, depending on their risk appetite. Within this, they could choose to allocate mostly to OmniScience smallcases or could divide it between mutual funds and OmniScience smallcases. We would definitely ask most investors to consider investing in global equities as well, if it is suitable for them.