Stock market, gold, fixed income - How you should invest this year according to Axis Securities
Premium- Axis Securities laid out key points in a recent note which it believes will help investors to sail smoothly through the volatility
As a multi-asset strategy and for portfolio diversification, domestic brokerage and research firm Axis Securities laid out key points in a recent note which it believes will help investors to sail smoothly through the volatility. The points talk about various factors and themes related to different asset classes like stock markets, gold, fixed income and currency.
Equities: The market continues to see a robust performance from the Small and Mid-cap stocks as these indices once again delivered a healthy performance during June. Axis Securities said that volatility continues to reduce indicating the continuance of a strong bull market and mid, small, and large cap value continue to remain key allocation themes.
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As earnings season is set to start, the impact of new lockdown measures will be critical and management commentary post-Q1FY22 results will be a key monitorable.
In its Covid 2.0 note, Axis had cut its Nifty earnings by 6% and subsequently its Nifty target by 6%. However, post Q4FY21 results and significant upgrades across the sectors, the brokerage’s estimates have also seen upgrades by 8%. Therefore, it also upgraded its December 2021 Nifty target to 17,400. ‘’Overall, we remain constructive on the market and believe the dips should be utilized to build positions in the recommended themes,’’ it said.
Fixed Income: Bond yields were largely stable at around 6% during the month on account of the RBI’s efforts on open market operations (OMOs), operation twist, and the government’s security acquisition program. Liquidity remained a key focus area in the June MPC.
Axis believes that lending support to small businesses and MSMEs will help reduce the stress in the system. It also believes that the yield curve will remain steep in light of ample liquidity in the system towards the lower end of the yield curve while the longer end of the yield curve remains cautious due to supply-side challenges in inflation. ‘’We continue to favor a quality approach in bonds with some non-AAA exposure based on individual risk appetite,’’ the note said.
Gold: Gold prices corrected by 4-7% in INR/USD terms in June on account of a more hawkish stance by the US Fed. More hawkish Fed led the dollar to strengthen further for the second half of the month, creating downward pressure on the gold prices.
‘’With the further strengthening of the dollar, gold prices continue to face challenges. Rising inflation expectation and improved economic outlook with a pick-up in vaccination for the second half of 2021 and view on the central banks tapering are the headwinds in the near term which will limit the gold prices,’’ the brokerage said. However, it sees gold to continue to be a preferred asset class for hedging risk against other asset classes. It continues its ‘Neutral’ stance on Gold and recommends a ‘buy-on-dips’ strategy.
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