As we enter in 2019, the big question on everyone’s mind is – where to invest in 2019? The answer may not be simple as due to market volatility in 2018, many investors have lost their wealth and individual investors have redeemed their mutual funds. By the end of 2018, the Nifty50 has delivered a return of a mere 3.5% while the mid-cap and small-cap index has lost 15.45% and 28.59%, respectively. Although individual investors have continued their systematic investment plans (SIPs), the returns varied. Investors who have made investments in large-cap mutual funds have managed to get lower returns compared to previous years. However, the mid-and-small-cap mutual funds have delivered negative returns in 2018.
Are economic conditions favorable?
The global factors still dominate the Indian markets. The crude oil prices have plummeted from $85 per barrel to $53 per barrel, which is a positive sign for the Indian stock markets. That also keep inflation rate low in India, as the country import most of its fuel. If the interest rates remain low, the stock markets are expected to perform well in 2019.
The major risk is election scheduled in 2019, which will have a major impact on the Indian market. On the global scale, the trade war between China and the US will continue but will have limited impact on the stock markets. On the other side, the markets will be impacted if foreign investors withdraw money from emerging markets, like India.
Interest rates in 2019: What to expect
Are the interest rates expected to go down in 2019? Recently, Reserve Bank of India cut its inflation forecast from September 2018 to April 2019 to 2.7%-3.2% from 3.9%-4.5% earlier. 2018 has been a rocky road for the borrowers and other mortgage lenders as banks continue to raise interest rates on home loans and other loan categories. State Bank of India (SBI) has increased prime lending rates in 2019. Other bank followed suit. As bank continue to increase rates, borrowers looked for ways to reduce EMI through various means i.e. extend the repayment schedule or transferring a loan to a different lender.
RBI will continue to infuse liquidity in the markets. Also, several banks will get the capital from the government as well. Hence, they will not depend on retail investors for extra funding. For individual investors looking to invest in financial instruments such as Fixed Deposit can expect a marginal rise in the deposit rates. On the other hand, RBI has hinted about the rate cuts in 2019, therefore, investors can expect lower returns from FD.
Investors in gold have benefitted in 2018 while they might regret their decision in investing in stocks or bonds. The spot prices of gold moved up 8.5% in 2018 owing to global certainty, global trade wars, rising fuel prices, and weak US dollar.
Many investors have stayed from this asset class due to poor returns in the past five years. According to the Association of Mutual Funds in India, gold ETFs saw a net outflow of INR 280 crore since April 1, 2018. China and India are consumption drivers of gold and since all the gold is imported in India, weak rupee accentuates gold prices. Having said that, the geopolitical tension rise in 2019, the gold prices are expected to increase or remain firm in uncertain times.
Building an investment portfolio is a complex exercise as the individual chooses different types of financial products based on goals. One has to keep in mind the returns, risks, liquidity, and taxation while deciding the right mix of financial products.
2018 wasn’t the year to invest in real estate and reap good returns. The sector showed an appreciation of 0.01%. The average property prices remain steady across cities, and grew only 1% in 2018, according to a report from Anarock.