Risks amid hope: How to navigate a year full of risks & opportunities?

NEW DELHI: With the economy growing below 5 per cent and government finances seem to be in complete disarray, equity investors in India are in two minds going into Calendar 2020.

Analysts say investors would need to rebalance their portfolios in view of the various risks ahead, including a likely shortfall in the government’s disinvestment proceeds, sharp deterioration in the fiscal situation, rising inflation, drying up of global liquidity and the forthcoming US elections.

The majority of a dozen analysts, who took part in the yearend survey of ETMarkets.com, said their key worries going into the new Calendar would be a possible spike in inflation, a major slippage in the government’s deficit maths, prolonging of the economic slowdown and further deterioration in global trade situation after Donald Trump’s possible return for a second term in the White House.


G Chokkalingam, Founder & CIO of Equinomics Research & Advisory, said he counts any aggravation in global deflationary conditions, Trump winning back US election leading to more protectionism at the cost of other economies, and possible failure of both Indian fiscal and monetary authorities to reverse the economic slowdown among the key risks to domestic stocks in 2020.


“Domestically, investors have high expectations from the forthcoming Budget. On the earnings front, we are building in very high growth for Nifty50 in FY21. Any disappointment in the Budget or a cut in earnings forecast for FY21 could lead to a correction in Indian equities, as valuations are close to previous peaks. Investors can look to buy Put Options before the Budget to hedge underlying portfolios,” said Rusmik Oza of Kotak Securities.

Sunil Jain of Nirmal Bang says concerns may also emerge should socialism become a bigger agenda for the government than the economy, and if there is a disproportionate increase in stress in the SME and retail sectors.

Chokkalingam advised investors to spread their portfolios across a number of stocks, ranging from anywhere between 10 to 20, to reduce concentration risk. One should avoid companies that have high debt, high levels of share pledges by promoters, very high receivables and inventories (as a percentage of annual sales), and poor track good record in the secondary market.


Deepak Jasani of HDFC Securities said a sub-5 per cent GDP growth, below-normal monsoon and the prevailing fiscal situation may result in a run on the rupee and on Indian stocks. He advised investors to take some exposure to export-oriented companies and increase allocation to gold and debt.

“For the first half of 2020, companies that are gaining market shares in India and exporters could be good options to ride out the risks. We are recommending pharma as a tactical buy,” said JM Financial.

Manav Chopra of Indiabulls Ventures asked investors to avoid leveraged positions in high-beta stocks.

“Stick to largecaps names like Axis Bank and SBI and focus on high quality midcaps,” said Naveen Kulkarni, Head of Research, Reliance Securities

Srinivas Rao Ravuri, CIO for Equity at PGIM India Mutual Fund, said sticking to quality names is a time-tested strategy for such times. He advised investors to continue with their mutual fund SIPs.