Mumbai: After the losses of 2008, last year was a good one for investors across asset classes such as equity, gold and commodities. The Sensex surged 81%, while gold rose by about one-fifth.
Mint spoke to Krishnamurthy Vijayan, CEO of JPMorgan Asset Management Co. Ltd about how investors should look at 2010 and what their investment strategy should be. Edited excerpts:
Do you think the days of sharp gains in equities and gold are over?
It’s a matter of the short or long term. There will be periods…when there will be sharp gains and there will be periods when there will be sharp losses. Personally, I think the market has come into what I call a trading zone, which is that it has run up extremely sharply and investors are being a little cautious saying that, “OK, we are seeing some gains. We will come in and when we have made our little bit of gains, we will go out.” In that kind of a market you will find that sometimes five or six months, sometimes one or two months, sometime couple of years go by, when there is no major change in the stock prices. Have we entered this phase? It’s difficult to predict. The market invariably proves you wrong. I would never presume to say this is what it is, I would say this is what it may be… It’s a period when we would probably see the market ranging—in terms of the Sensex—somewhere around the 17,000 levels.
Which asset classes would you advise investors to opt for?
Regardless of what happens in the markets, by and large for investors—the option to invest is when you have the money. The only way to do that is to go systematically. Because, anything else—the chances are that they will get it wrong anyway.
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It’s a question of asset allocation. Because, if a person needs to have 70% of his assets in fixed deposits because he is too old to do anything, then it doesn’t make sense to say this is a good time to go into equities.
Whereas if a person has 25% of his assets in equity and he is 25 years old, it makes sense for him to go into equities even now because ultimately, if you are looking at Indian equities, you are looking in the best market place. Yes, there are noises in the world which say that maybe there will be incidents in 2010 (which could drive down stock prices and lead to volatility), but how does it matter to somebody in a salaried job, who has to plan his wealth for a longer period of time? So very clearly, asset allocation is the way to go regardless of market conditions.
What do you think about gold?
Gold is an extraordinarily long-term asset class. You have periods when it runs up like crazy. But the last time metals ran up like they have run up in the last year was about 12 years ago, probably 20 years ago.
I don’t track metals and commodities...but would I tell my wife “don’t buy gold during Diwali”? Probably not. A small part of my assets can go into gold still.