Those who bet on gold funds at the start of 2011 would have
every reason to pat themselves on their backs for the good fortune.
In the race between different asset classes in 2011, gold
funds won hands down, with domestic investors in them pocketing a 32 per cent
return.
Among the investment options, equity fared the worst, with
diversified funds losing 22 per cent in value. Debt options such as fixed
deposits and short-term debt funds took the middle path, returning 8.5-9 per
cent.
Diversifying your portfolio to include real estate or
agri-commodities would have delivered a healthy gain too.
Equities sink
The year 2011 was a painful one for equity investors, with
the BSE Sensex losing 24 per cent (as on December 17). Diversified equity funds
contained losses better than the index, but still saw an average erosion of 22
per cent in value. The one class of equity funds that did well, FMCG sector
funds, delivered a respectable 13 per cent return.
Within debt options, mutual funds investing in short-term
debt delivered the best 9 per cent return. They were able to maximise gains by
locking into certificates of deposit or corporate paper yielding 9-10 per cent
during the first half of the year.
Long term debt funds averaged 8 per cent. If you invested in
January, one-three year bank deposits yielded 8-8.5 per cent, though rates
later rose to 10 per cent.
the top dog
It was, however, gold that proved to be the top dog among
asset classes in 2011. Investors in gold exchange traded funds made a handsome
32 per cent gain. More than half of these returns came from the weakening value
of the rupee against the dollar, which boosted domestic gold prices.
Global gold prices, which have dipped recently, closed the
year with a 15 per cent gain in dollar terms.
Real estate prices too were on an upswing across the
country. Residential property prices as measured by Residex (Source: National
Housing Board) were up 20-25 per cent in the metro cities between January and
September (the latest available data).
While industrial commodities did not do too well,
agri-commodities were another offbeat choice that would have paid off this
year. NCDEX Dhaanya — an index representing the ten most liquid agri-futures
contracts in NCDEX — appreciated 30 per cent in the last one year.
What's ahead?
So, given that 2011 was a year full of surprises, which
assets should investors bet on for 2012?
Quite a few fund managers and brokers predict a classic
‘reversion to mean', where gold may take a back seat while assets such as
equities may stage a revival.
Institutional brokers and asset managers take the view that
domestic demand will protect India from the global slowdown in 2012, leading to
a bottoming out of corporate profits and stock markets in the early part of
2012.
In debt, the consensus seems to be that short-term funds may
not repeat their 2011 performance.
With interest rates likely to fall, investors should look
instead at long term funds, especially gilt funds that can gain from rate cuts.
Mr Vishal Kapoor, Head Wealth Management, Standard Chartered Bank, adds a
couple of offbeat asset classes to the above choices. “One theme we like is
international equities.
“In markets such as China and north-east Asia, valuations,
after correction, look attractive, though they can only be diversifiers to your
Indian equity holding.”
If you retain your belief in gold, he also suggests buying
gold mining stocks (available via mutual funds).
“We think gold equities are a good opportunity.
Traditionally, gold equity has a high correlation with gold prices.
“They have the additional benefit of operating leverage.
Gold equities have not caught up with gold commodities and we see no reason why
they will not catch up.”
Source: http://www.thehindubusinessline.com/markets/stock-markets/article2723979.ece
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