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Business News/ Money / Personal Finance/  Prabhudas Lilladher increases allocation to gold for its multi-asset portfolio
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Prabhudas Lilladher increases allocation to gold for its multi-asset portfolio

Amid rising market valuations and volatility, Prabhudas Lilladher increased gold allocation for its Multi-Asset Dynamic Portfolio by 3%. It reduced the large and midcaps equity allocation by 5%

Brokerage House Prabhudas Lilladher increased gold allocation for for Multi-Asset Dynamic Portfolio amid market overvaluationPremium
Brokerage House Prabhudas Lilladher increased gold allocation for for Multi-Asset Dynamic Portfolio amid market overvaluation

To reduce the impact of high valuations in the equity market, brokerage house Prabhudas Lilladher has diversified its Multi-Asset Dynamic Portfolio by increasing its gold allocation by 3% to an average of 15%. At the same time, it has reduced the large and mid-caps equity allocation by 5%.

Multi-Asset Dynamic Portfolio is Prabhudas Lilladher's quant-based tactical asset allocation PMS strategy that dynamically invests in passive instruments across domestic equities, fixed income, commodities, alternates and international equities, said the brokerage.

The brokerage increased the weight for gold by 3% at an average price of 53,800 around the last week of November.

“Gold has acted as a perfect diversifier this year and has both cushioned the fall in equities in the first half of the year and reduced the volatility of the portfolio as well," said Siddharth Vora - Head of Investment Strategy and Fund Manager – PMS, Prabhudas Lilladher.

The increase in gold allocation by the company has come in the wake of a changed indication on its valuation meter, which is currently suggesting large volatility in the large and mid-caps equities. Companies in this section are indicated to be highly overvalued. On the other hand, the momentum meter is suggesting better risk-reward for Gold vs domestic equity investment. Therefore, the company reduced the allocation in large and mid-caps equity by 5 % and increased its gold allocation.

Gold being a safe haven for investors, saw a constant increase in PL allocation for the past months. The current gold allocation in the PL’s Multi-Asset Dynamic Portfolio stands at an average of 15%.

Prabhudas Liladher maintains its Multi-Asset Dynamic Portfolio by strategising its investments based on several meters including a macrometer, monetary meter, cyclometer, relative value meter, sentimeter, technometer, inflation meter, volatility meter, multi-asset momentum, and multi factor momentum.

Since the brokerage received a signal to increase its gold allocation in the portfolio over a month, there has been a downward trend in many of the asset categories. According to the table given below, Gold has generated 3.8% returns since last month. On the contrary, its counterparts like Nifty 50 are not doing that well. Nifty 50 is down by 0.7% in the past one month. Showing a similar trend, Nifty Next 50 and Nifty Midcap 50 are down by 0.48% and 0.93%. S&P 500 and Nasdaq 100 showed are also in their low phases as their values plunged by 2.15% and 3.31%.

Data of change in value of assets in past one month, from 25 Nov to 20 December
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Data of change in value of assets in past one month, from 25 Nov to 20 December

Siddarth Vora stated that the tactical allocation to gold also helped the firm in the first half of the year at the time of Russia's first attack on Ukraine in Feb-March period. “We increased our allocation to Gold in Feb 2022 from 11% to 17% and gradually cut it to 9% as gold started losing its momentum," he added. Since then, the company has been holding gold allocation at 9 % till November.

He is expecting Gold to be a key asset in diversifying gold allocation in the portfolio. "With Indian equities being overvalued, both compared to its historical valuations and w.r.t to other global equity markets, and rising recession risk in developed markets, we expect Gold to continue to play its role as a good diversifier to the portfolio," said Siddharth Vora

 

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Published: 21 Dec 2022, 12:04 PM IST
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