2018 was a tricky year, to say the least. The rupee depreciated but gold appreciated. Interest rates were, by and large, left unchanged by the RBI. Debt investors didn’t get much to cheer about, and neither did equity investors.
The only solace was that the Indian stock markets ended the year in the green, unlike most of their global counterparts. The Nifty ended 2018 at 10,862.55, up by 3.15% while the Sensex rose 5.19%, to end at 36,068.33.
It is true that your mid-cap and small-cap investments might have fared poorly, but there’s no denying that the choppy year provided great buying opportunities for long-term investors. According to industry body CII, India emerged as the fastest growing major world economy in 2018 and is expected to witness strong economic growth in 2019 as well. There was wealth to be built in 2018, as will there be in 2019 and beyond.
So, let’s look back at the sectors and themes that did well in 2018 and see how they make an investment case for 2019 as well.
Indian consumption story stays strong
The Indian consumer is consuming like there’s no tomorrow. We have more discretionary income to spend and the same is expected to rise further–in urban as well as rural India. In the next 15 years, the Indian middle class is expected to burgeon by the addition of another 45 crore people.Higher disposable incomes have been the driving force behind the growth seen by consumer companies. Click To Tweet
This bodes well for consumer and FMCG companies. The consumption story stayed strong in 2018 and consequently, three smallcases that within this theme performed exceptionally well.
The India 24×7 smallcase returned 19.04% in 2018. This smallcase comprises companies that will benefit from the Central Government’s decision to allow shops and establishments to stay open 24×7.
New India is becoming increasingly brand-conscious. India is expected to become the third-largest consumer market by 2030 and companies that have a strong brand presence will do well. The Brand Value smallcase comprises such names Future Retail, Hindustan Unilever and ITC, among others. The smallcase returned 12.84% in 2018.
Another smallcase that is a portfolio of consumer companies is The Great Indian Middle Class. It returned 4.24% in 2018 and is expected to do well in the coming times with a rise in our discretionary income.
The “lit” Indian IT sector
While the rupee depreciation might have hurt most Indian companies, it spelt good news for the Indian IT sector. India’s IT exports have been growing significantly–increasing to $125 billion in 2017-18 from %107 billion in 2015-16. The Information Technology and Business Management sector’s revenues are expected to grow to $350 billion over the next 7 years.
A depreciating rupee will only help the prospects of this sector, as it did in 2018. The smallcase IT Tracker returned 17.24% in 2018. Going forward, the sector will continue to do well as India continues to be the world’s top sourcing destination for an industry that is globally valued at USD 173-178 billion.
Asset allocation withstands rough weathers
The need to diversify across asset classes is paramount in tough economic conditions. Asset allocation helps you not only protect your investments but continue building wealth as well.Diversifying across different asset classes helps you get the best of both worlds--protect as well as build wealth. Click To Tweet
While the stock markets remained turbulent through 2018, gold prices rose to a six-month high towards the end of December. On a year-to-year basis, the gold price rose by 7.78% in 2018.
Pure equity investors might have seen their portfolios going deep in the red, but those who would have diversified would have had an easier ride. The All Weather Investing smallcase, which is diversified across equities, gold and fixed income, returned 3.23% in 2018.
With the LS elections coming up, asset allocation will continue to play a strong role in protecting and creating wealth in 2019 as well.
While we can only hope for a smoother ride in 2019, it’s important to look at the bigger picture and focus on your investment goals. Ignore short-term volatility and invest systematically. That’s all you need to do to have a good year, investment-wise at least.
Happy New Year!