Investors need to lower return expectations in 2022, says Trustplutus Wealth’s Kaul

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Investors should temper their expectations for equity returns in 2022 and stick to their asset allocation, says Sameer Kaul, managing director and CEO of TrustPlutus Wealth (India), a wealth management firm overseeing around 11 000 crores of customer funds.

“The recent rally has made valuations sky-high, that calls for a cautious approach to investing here,” Kaul said in an interview with cnbctv18.com.

He thinks an investor should diversify their investments across asset classes.

“This applies to both equities and fixed income securities. Investors should stick to their asset allocation and also moderate return expectations in 2022. We also advise investing part of the portfolio in international equities with a view to diversification,” he advised. declared.

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He cautions investors against attempts to synchronize the market, which even seasoned market players have failed to master. Kaul quotes a line from Nick Murray who is the author of Simple wealth, inevitable wealth and The excellent investment advisor. “Market timing is a fool’s game, while time in the market is your greatest natural advantage,” he says.

Kaul’s investment philosophy could be described as conservative. He prefers stocks available at low prices with multiple winners and which pay good dividends. At present, he is bullish on Indian private sector banks, information technology companies and some fast-moving pharmaceutical and consumer goods names. It also favors utility companies that offer a stable dividend and are inexpensively valued.

While there are pockets of opportunity in the mid- and small-cap space, he believes valuations, in general, have become expensive given the run-up in the past 18 months. That said, investors should be wary of where to put their money and should consider the nature of the business, quality of management and valuation when deciding which company to invest in.

Although lofty valuations, rising cases of the Omicron variant of the coronavirus and likely rising interest rates pose risks to the rally in equities, the overall outlook remains positive.

“The optimism can largely be attributed to three dominant themes, namely the formalization of the economy, the financialization of savings, and digitalization,” Kaul said.

“The big valuation companies have gotten bigger and are expected to post strong profits in the future. The growing participation of savers in equity markets clearly shows that the financialization of savings is underway in the economy. Monetary policies ultra-accommodative global central banks and abundant global liquidity also contributed to the rally in equities.Several new-era companies tapped into the markets with their IPOs, which broadened the investment universe and introduced new investment themes in public markets,” he explained.

Meanwhile, hopes that the next EU budget would include growth-friendly measures also kept underlying investor sentiment positive.

“Government finances are in good shape with strong tax and GST collections. We expect continued focus on reforms, bearing in mind the government’s overall priorities of reducing state ownership of non-strategic assets, creating incentives for encourage local manufacturing, measures that can kick-start import substitution as well as a healthy pipeline of divestments,” Kaul said.

Given the prospect of further acceleration in inflation and the acceleration of the recovery, there is a chance that the Reserve Bank of India and global central banks will raise interest rates from the start of 2022 and that liquidity is also limited by central banks. In such an environment, real estate investment trusts and infrastructure investment trusts are likely to attract greater investor interest, he said.

“We remain constructive on both REITs and InvITs and have actively recommended these investments to our clients. REITs and InvITs provide regular income in the form of dividends, interest payments and/or return of capital (debt amortization) They also allow an investor to hold an underlying portfolio of high-quality real estate or infrastructure assets,” he explained.

(Edited by : Santosh Nair)

First post: STI

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