Wondering where to invest your money in these uncertain times? Here are some tips

The stock markets in India have been understandably volatile amid the second wave of the coronavirus pandemic, which has wreaked havoc across the country.

However, Reliance Securities ED and CEO, Lav Chaturvedi, remains optimistic about the markets and India’s economic recovery.

Over the next two-three months, if the country is able to contain the spread of the virus and get back to some sort of normalcy, with some corrections “here and there”, he expects the markets to be resilient, with an upward trajectory. 

Reliance Securities had projected an 8-10 per cent return from the equity markets for 2021-22 before the second wave hit, and it hasn’t changed its stand yet.

“We would like to continue with that stand still, we have not changed that... the only caveat is that we probably want to ensure that this is behind us sooner than later,” he tells Yourstory. So for those interested in investing in the equity markets, what should they do amidst all the volatility?  “Let the volatility remain in the market, not in your conduct, your conduct should be opposite to that, it should be as smooth as possible,” he says.

Which are the sectors to watch out for?

At the outset, Lav highlights that “any sector view is a function of the time horizon”. In terms of which sectors are likely to give the most returns in a two-three year period, Lav’s bets are on the ones which have been battered the most in the pandemic. These include hospitality, entertainment, and aviation. “If you really have a long term horizon, you may want to allocate some of your money into these sectors, because this is where everybody's saying stay away from.

“And if you truly believe that this (current crisis) will be behind us, then certainly these sectors should give most returns, provided you have a two-three year horizon, with some risk appetite, and you do an allocation to this, not the entire thing.”

This would be an ideal investment bet for young millennials or somebody who wants to participate in the new growth trajectory which is going to come, he says.

The other sectors to watch out for, which are likely to gain from the current situation, are pharma, IT and infrastructure. “Those are the two-three sectors that may be good sectors where you want to allocate, where there will be an upside. The base is not that low but there will still be some upside, because there are a lot of activities in this space,” says Lav.

He also remains bullish on banking and BFSI (banking, financial services and insurance), sectors that “support the real economy”.  Despite the positive outlook, Lav has a word of caution while picking out stocks from the sector.  “This sector overall is a positive sector, but my only request to the investor in this sector is be more specific in what you're picking, because the growth may not be as even across the companies as it may be in some other sectors. Here it may be more specific to a few companies, because this is about services, this is about finance, this is about track record,” he shares.

While Lav didn’t want to call out specific company names, he did stress on the fact that he would strongly urge the investor to look into the track record of these companies. “Because one thing that we have to be cognizant of, is that these restrictions and curfews are going to bring some kind of stress into the books, we all know that. Now, there will be some companies who probably would have managed it well with their diversified portfolio, with their processes, and their accounting, which will be more prudent, as compared to others.”

As a parting shot, Lav advises investors to allocate across asset classes and not just equity.

“Equity should only be an allocation, you have to diversify, you have to go into the fixed income, into the other asset classes, based upon your appetite, and please ensure that some allocation is being done across the board.” Two of the popular fixed income asset classes in India are fixed deposits and public provident funds (PPF). Other asset classes include commodities, real estate, and even money in a savings account or any other liquid schemes (classified as cash and cash equivalents).

Last week, the stock markets closed lower after gaining for two consecutive weeks.

At the end of yet another volatile session on Friday, the Sensex gained 42 points to 48,733, while the Nifty slipped 19 points to settle at 14,678.