Equities, bonds or gold: Where can investors find value in 2024?

Stock market news, share market today: Having a balanced investment portfolio is a must for living a hassle-free and accomplished life. However, given the fluctuating market mood due to several domestic as well as global factors, it becomes a daunting task for investors to have the right mix of assets to achieve their financial goals.

That said, in this article, we try to understand how the equity, debt, and gold markets can fare going forward this year and how investors should decide their asset allocation.

Equities will be rewarding in the long run; lump sums can be deployed into quality large-caps

Equities have been rewarding as well as risky. After a phenomenal run that led the indices to a new high on Wednesday (January 17), Indian equities tumbled by a sharp quantum. While this was on expected lines, experts from the space still vouch for higher or one-time allocation in large-caps while increasing their allocation in mid- and small companies that command relatively higher valuations.

"Considering the current scenario of higher valuations in mid- and small-caps, a prudent approach would involve directing lump-sum investments towards large-caps while still increasing allocations towards mid- and small-caps in a staggered manner through the SIP route for the long term," suggests Ajaykumar Gupta, Chief Business Officer, TRUST Mutual Fund.

George Thomas and Christy Mathai, fund managers at Quantum Mutual Fund, are of the view that, amid reasonable earnings growth, market valuations may become rational over time.

Further, they maintain that the continuation of policy may also not induce volatility in the markets around the election period. "While the current setting doesn’t indicate chances of a material correction, staggered investments may be considered for fresh investments to benefit from any near-term volatility," the expert advises. The expert believes IT and banks can drive markets in 2024 after a relatively muted return and amid scope for earnings improvement.

For short-term investment, investors will be better at locking in the current high-interest rates in the bond market or may go for longer-term G-securities.

On the bonds, Deepak Gagrani, Founder of MADHUBAN FINVEST, stated that the time is just right for short-term investors to tap into the higher interest rate currently on offer. "Capitalising on the current peak in interest rates allows investors to lock in favourable rates for an extended duration and potentially benefit from mark-to-market gains as interest rates start to decline," the expert remarked. Besides, the expert noted that for a longer tenure, investors will be better off deploying their funds in equities.

"While the equity market could face challenges after a spectacular run in 2023 and eight consecutive years of positive returns for Nifty, the enduring growth narrative of the Indian economy remains intact. Any corrective phase in equities throughout 2024 could present a compelling opportunity for long-term investments," added the expert.

Taking note of some of the positives of the debt market, such as the demand for G-securities and increased foreign flows into Indian debt, among others, Pankaj Pathak, Fund Manager at Quantum Mutual Fund, said that with a high starting yield and an expectation of a fall in bond yields, "we believe that long-term government bonds offer the investor a rewarding opportunity."

Another good option suggested by him in the debt segment is dynamic bond funds, which offer the flexibility to change if things don’t pan out as expected. But for the same reason, the expert maintains that investors need to have a 2-3-year view. For investors with low tenure, the expert suggests allocations in liquid funds.

Gold: An investment for tiding over any potential downsides in other asset classes

Gold allocation is advised for risk mitigation. Deepak Gagrani is of the view that amid ongoing geopolitical tensions, anticipated recessionary trends in major developed economies, and central bank actions, gold and silver continue to be entrenched in a long-term bull cycle.

Anil Ghelani, CFA, Head of Passive Investments & Products at DSP Mutual Fund maintained that the expected rate cuts and “easy monetary policy” coming up in 2024 for the US can be a big trigger for two investment themes: GOLD and BONDS.

Echoing a nearly similar view, Deepak Jain is the Head – Sales, Edelweiss Asset Management Limited (EAML) noted Gold offers stability amid uncertainties, and bonds provide income and security, especially in government or high-quality corporate bonds.