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Last Updated : May 27, 2019 03:11 PM IST | Source: Moneycontrol.com

Modi 2.0 portfolio: Here's how to allocate Rs 10 lakh for next five years

The landmark victory not only suggests continuity of reforms but also brings an end to political uncertainty, suggest experts. The climate is just about right for first-time investors to build a strong portfolio for the next 5 years

Kshitij Anand @kshanand

Benchmark indices climbed historic levels last week after Narendra Modi-led NDA was successful in retaining the majority in 17th Lok Sabha. The S&P BSE Sensex hit 40,000 for the first time while Nifty50 also scaled Mount 12K.

The landmark victory not only suggests continuity of reforms but also brings an end to political uncertainty, suggest experts. The climate is just about right for first-time investors to build a strong portfolio for the next five years.

The portfolio should be constructed in a way that reflects the vision of the Modi government as was given in the BJP manifesto 2019. Investors can look at reshuffling their portfolio to include economy-linked sectors such as Infra, cement, housing and banking.

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“The outcome of 2019 general-election was a decisive win for the current government that initiated multiple reforms across the sectors to lift the structural foundation of Indian economy,” Dinesh Rohira, CEO & Founder, 5nance.com told Moneycontrol.

“Government is likely to make aggressive policy decisions to boost infrastructure related sectors through massive capex investment in the coming years. It is expected to benefit roads & constructions, real estate, cement, specialty chemicals and rural-based sectors in consumption segment,” he said.

Hence, existing investors can add these sectors in the portfolio to diversify their portfolio and benefit from long-term play through stable policy reforms.

The market has already responded by hitting record highs but upside remains limited from here at least in terms of benchmark indices but specific stocks and sectors are likely to do well in the next five years.

After a strong rally of about 4 percent last week, investors should wait for a dip before they start building their portfolio for long term, suggest experts.

“In the short-term, there may be some good euphoria due to the strong mandate given to PM Modi and we can see Nifty hitting 12,500 soon. We believe this rally should be used to reduce any excess equity exposure that you may have in your portfolio. Hence, don't be very aggressive in buying at present levels,” Vijay Kuppa, Co-Founder, Orowealth told Moneycontrol.

“But don't worry, such peaks and troughs are normal for a healthy market. If everything remains normal and the new government continues as it did in their last tenure, we can expect Nifty to hit 20,000 by the time this government's tenure ends in 2024. That's a good 70+ percent returns from here,” he said.

We spoke to various experts and they have given us various portfolio options if someone wants to invest about Rs 10 lakh right now for the next five years. For simplicity, we have taken the age of an individual in the bracket of 30-40 years:

Hemang Kapasi, Portfolio Manager-Equity, Sanctum Wealth Management

Considering the young age of the investor, the ability to absorb risk would also be higher. Hence, we advise a higher allocation to equities and lower to other asset classes.

There should be at least 65 percent allocation towards equities while investments in the fixed income and gold should be 25 percent and 10 percent, respectively.

Hemang-kapasi

Within equities, one should adequately diversify into largecaps (50 percent of equity allocation) and midcaps as the former provide stability and the latter provide an opportunity for higher growth.

Rahul Jain, Head, Edelweiss Personal Wealth Advisory

Going by the rule of asset allocation and assuming the investor is willing to take the risk, one may divide the investment amount as follows:

1) Rs 6 lakh in equity (stocks/mutual funds) to provide higher growth for wealth creation
a. 50 percent can be allocated to largecap
b. 30 percent to midcaps

c. 20 percent to smallcaps

Rahul-Jain-1

2) Rs 4 lakh in debt instruments that offer stability and assured returns
d. High-quality bonds and debentures

e. High-quality corporate fixed deposits

Rahul-Jain-2

Dinesh Rohira, CEO & Founder, 5nance.com

The ideal portfolio allocation of investors will be different from one another despite a common similarity as investment horizon and risk-taking capacity vary on individual perspective.

Dinesh-Rohira

Vijay Kuppa, Co-Founder, Orowealth

We recommend investments to be diversified across equity and debt in 80:20 ratio (this assumes a fairly risk-taking investor given the investor's age and investment time horizon) with around 60 percent of the equity allocation in largecap stocks/mutual funds. The rest can be in mid/smallcap stocks/funds.

Vijay-Kuppa-1

A majority (75 percent) of the debt portion should be invested in short-term income funds with the remaining (25 percent) in money market funds.

Vijay-Kuppa-2

Rajesh Cheruvu, Chief Investment Officer, WGC Wealth

For asset and investment allocations decisions, we consider behavioural aspects like their ability to stomach severe drawdowns, ongoing market volatility, liquidity needs and return expectations and corresponding investment horizons than just the age group and decision to deploy in a particular asset class.

Having said that, assuming an investor with a moderate risk profile, we suggest 50 percent equity, 45 percent fixed income and 5 percent alternative allocations. Within equities, 20 percent allocations can be considered into midcaps and balance in largecaps.

Rajesh-Cheruvu

Keep fixed income allocations to the short end of the yield curve and avoid allocations to below AA credit rated assets.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on May 27, 2019 09:58 am
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