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    Next fiscal could see both investments and consumption drive growth, with exports providing a helping hand. Rising consumption will push capacity utilisation above the crucial threshold of 75% by the end of 2022, which should trigger a broadbased pickup in private sector investment activity, said Nayar. Private consumption — the biggest GDP component — rose by over 8.6% in the second quarter of the fiscal but is yet to cross pre-Covid levels. If the economic recovery continues, private consumption is expected to rebound, too.

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    The rapid advance of Omicron in the metros remains a concern as it could disrupt the economic recovery. However, economists are optimistic that its impact would not be so severe amid indications that the variant may spread faster but is not likely to be as damaging as earlier ones.

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    “Rising input prices (WPI) is bound to find its reflection on retail prices (CPI). This, along with higher deficit, will increase interest. However, exports is a ray of hope, said Devendra Pant, chief economist, India Ratings.

    Economists ET spoke to expect RBI to raise the repo rate by 50 basis points starting next financial year. Another concern is high crude and commodities prices, which could cause a faster-than-expected rise in interest rates if inflation accelerates.

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  • Here’s where stock investors should consider putting their money in 2022Here’s where stock investors should consider putting their money in 2022

    Coming off several years of outsized gains in the stock market, investors may be hoping 2022 is like deja vu again.

    Don’t count on it. While future performance is impossible to predict with certainty, many financial advisors expect returns will come back down to Earth.

    “We have been telling clients to expect a lackluster year in the stock market and in portfolios in general, with lingering elevated inflation, slower economic growth and interest rate hikes,” said certified financial planner Shon Anderson, president and chief wealth strategist for Anderson Financial Strategies in Dayton, Ohio.

    So far this year, the S&P 500 Index — a broad measure of how U.S. companies are faring — has posted a total return (price gains plus dividends) of about 29.2%. That’s on the heels of 18.4% in 2020 and roughly 31.5% in 2019 (and a loss of more than 4% in 2018). Over time, the annual average is about 10%.

    More from Personal Finance:
    Year-end money moves to make before 2022
    How to spot and fix your spending problem
    Here are tips for spending less at the pump

    The Dow Jones Industrial Average has a total return so far this year of 21.1%, following 9.72% in 2020 and roughly 25.3% in 2019 (and a loss of 5.6% in 2018). The tech-laden Nasdaq Composite index, meanwhile, has posted a 23.2% gain so far this year, after 44.9% in 2020 and about 36.7% in 2019 (and a loss of 2.84% in 2018).

    While 2022 may end with lower returns — i.e., single-digit gains, perhaps — the economy is expected to continue to expand, albeit at a slower pace than earlier in the year. In the third quarter, gross domestic product — which measures all economic activity — grew at an annual pace of 2.3%, according to the Bureau of Labor Statistics. That came on the heels of 6.5% annual growth in the second quarter, and 6.4% in the first quarter.

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    International stocks — in  both developed markets and emerging markets — also may outperform, he said.

    “Looking at the second half of the year, many countries should turn up growth year over year, which would be quite positive for these two broad markets, especially given the reasonable multiples they are priced at,” McKay said.

    Real estate investment trusts could also do better than the broader market, Anderson said. REITs, as they’re called, are companies that own and/or operate properties such as office buildings, shopping malls, apartment complexes and warehouses. 

    “Specifically for REITs, we think there is more opportunity in the data centers, self-storage and health-care [facilities],” Anderson said. 

    Stocks related to residential building may also be a spot of strength, said Joseph Veranth, chief investment officer and portfolio manager at Dana Investment Advisors in Waukesha, Wisconsin. 

    Industrial stocks may also benefit from a strong economy and from more being spent on infrastructure or defense, said CFP Barry Glassman, founder and president of Glassman Wealth Services in Vienna, Virginia. Generally, companies in that sector manufacture and distribute goods used by industries such as construction, engineering, aerospace and defense, or they may be involved in transportation and logistics services.

    Additionally, Glassman said, his firm is focusing on total shareholder return — that is, looking at stocks with consistent dividend payouts, as well as stock buybacks. The latter generally causes a company’s share price to rise because fewer shares are on the market once the buyback happens.

    “I can’t imagine the S&P continuing its impressive three-year run but even if the index doesn’t do as well, I think there are stocks that could do better,” Glassman said. “I think what will rule is profitability and stability of earnings.”

  • NPS to allow 4 changes per fiscal in investment pattern

    Pension fund regulator PFRDA will soon allow subscribers of the National Pension System (NPS) scheme to change investment pattern as many as four times during a financial year as there has been a demand to increase the limit, its chairman Supratim Bandyopadhyay said Tuesday.

    Currently, NPS subscribers are allowed to change the investment pattern twice in a financial year. “One can change the investment choice twice in a year. Now, in a very short period of time, we are going to increase it to four times because there are requests that you allow more number of times (to change the investment pattern),” he said, addressing a webinar on NPS scheme organised by industry body Assocham.

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    “People sometimes mix it up with some mutual fund kind of thing that can give good returns. You have to give it some time and thereafter, only you can use it (changing option). Use it judiciously, we are going to increase it to four times in a year (financial year),” Pension Fund Regulatory and Development Authority’s chairman said.

    Subscribers are allowed to allocate their investments in a mix of instruments such as government securities, debt instruments, asset-backed and trust-structured investments, short-term debt investments, and equities and related investments.

    Currently, pension fund managers under NPS are – ICICI Prudential Pension Funds Management Company, LIC Pension Fund, Kotak Mahindra Pension Fund, SBI Pension Fund, UTI Retirement Solutions, HDFC Pension Management Co, and Birla Sun Life Pension Management.

    Bandyopadhyay also said the PFRDA wants to offer a variable annuity product to the subscribers after retirement, aimed at shielding them against inflation. “Once the annuity starts, that remains constant for your lifetime. Of course, there is one annuity (product) that gives a simple rise of three per cent per year but obviously, that will not take care of the risk of inflation.

    “We have been talking to the insurance regulator (Irdai) …and we have been talking to the annuity service providers also if they can think of this kind of variable annuity which can give some cushion against the rise of inflation,” he said.

    The PFRDA chairman said the Insurance Regulatory and Development Authority of India (Irdai) has made a working committee and a report has also been submitted by the committee.

    “We are in discussion with Irdai to ensure that those kinds of products are released as quickly as possible,” he added.

  • NPS to allow 4 changes per fiscal in investment pattern

    Pension fund regulator PFRDA will soon allow subscribers of the National Pension System (NPS) scheme to change investment pattern as many as four times during a financial year as there has been a demand to increase the limit, its chairman Supratim Bandyopadhyay said Tuesday.

    Currently, NPS subscribers are allowed to change the investment pattern twice in a financial year. “One can change the investment choice twice in a year. Now, in a very short period of time, we are going to increase.

    The only cautionary note PFRDA wants is that it is a long-term investment (product) to build a pension corpus, and it should not be treated akin to a mutual fund scheme, he said.

    “People sometimes mix it up with some mutual fund kind of thing that can give good returns. You have to give it some time and thereafter, only you can use it (changing option). Use it judiciously, we are going to increase it to four times in a year (financial year),” Pension Fund Regulatory and Development Authority’s chairman said.

    Subscribers are allowed to allocate their investments in a mix of instruments such as government securities, debt instruments, asset-backed and trust-structured investments, short-term debt investments, and equities and related investments.

    However, there are different rules for different sets of subscribers. For instance, government sector employees cannot have high exposure towards equities, while the corporate sector employees are allowed to allocate as much as 75% of asset towards equities.

    Separately, subscribers are also allowed to change fund managers once in a year. Fund managers invest subscribers’ pension assets in the prescribed investment schemes, as per choice.

    Currently, pension fund managers under NPS are – ICICI Prudential Pension Funds Management Company, LIC Pension Fund, Kotak Mahindra Pension Fund, SBI Pension Fund, UTI Retirement Solutions, HDFC Pension Management Co, and Birla Sun Life Pension Management.

    The PFRDA chairman said the Insurance Regulatory and Development Authority of India (Irdai) has made a working committee and a report has also been submitted by the committee.

    “We are in discussion with Irdai to ensure that those kinds of products are released as quickly as possible,” he added.

     

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  • Investment via P-notes drop to Rs 94,826 crore in November

    Investments in Indian capital market through participatory notes (P-notes) dropped to Rs 94,826 crore till November-end after hitting 43-month high in the preceding month.

    P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

    According to Securities and Exchange Board of India data, the value of P-note investments in Indian markets — equity, debt and hybrid securities — was at Rs 94,826 crore by November end as compared to Rs 1,02,553 crore by October end.

    The month of October saw the highest level since March 2018, when P-notes had invested to the tune of Rs 1,06,403 crore. Abhay Agarwal, Founder and Fund Manager, Piper Serica, a Sebi-registered PMS, said there was a net sale of more than Rs 8,000 crore in November in the equity segment by P-note holders reversing the October inflow of more than Rs 5,000 crore.

    This is consistent with the FPI sales that have been seen in the current quarter to lock-in their gains for the year. “We expect to see a negative number in the month of December also. There was a marginal net inflow in the debt segment, but the number is too small to read much into,” he added.

    At the end of September this year, the investment level was at 97,751 crore, Rs 97,744 crore by August-end. The figure for July was revised to Rs 85,799 crore from Rs 1,01,798 crore posted earlier.

    Prior to that, investment level was at Rs 92,261 crore by June-end, Rs 89,743 crore by May-end, Rs 88,447 crore at April-end and Rs 89,100 crore by March-end.

    Of the total Rs 94,826 crore invested through the route till November, Rs 84,915 crore was invested in equities, Rs 9,605 crore in debt, Rs 306 crore in hybrid securities.

    P-notes flows have been volatile over the last four months in line with the volatility of the global and Indian markets. Divam Sharma, Co-founder, Green Portfolio, a Sebi-registered PMS, said that November 2021 has witnessed slight change in course of FPI inflows and this negative trajectory has also continued in the month of December 2021.

    The key reasons for FPI withdrawal from equity markets include expectations of monetary tightening by federal banks, high inflation levels, uncertainty around Omicron variant spread, and higher valuation levels in equity markets, he said.

    “This is also considering that most FPI’s go on year-end holidays for 2-4 weeks and had lightened positions before their vacations. This is a global trend as emerging markets across the globe along with developed markets have witnessed selling in November and December,” he added.

    The assets under the custody of FPIs declined to Rs 52.24 lakh crore in November-end from Rs 53.6 lakh crore in October-end. Piper Serica’s Agarwal expect the net flows to be anemic in the near future till FPIs start deploying their 2022 allocations.

    There are no big IPOs slated in the near term so the primary market inflows from P-note holders will be weak. Piper Serica’s Agarwal expect the net flows to be anemic in the near future till FPIs start deploying their 2022 allocations.”At the same time, market valuations have become quite reasonable after the recent correction. If the Omicron cases do not lead to national level lock downs and CPI inflation does not cross 6 per cent we expect the flows to be positive in the next quarter,” he added.

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