Equities have given higher returns than gold in long term: Kunj Bansal

In the current scenario when markets are looking overvalued, how should a retail investor manage his portfolio allocation?
One has to create a risk profile by bifurcating between fixed income asset class, which include bank FDs, deposits, NCDs where risk being less the returns also are less and non-fixed class like equity, gold and real estate. Typically, it's decided by three factors. Firstly, one's age. A younger person can afford to have a larger part in non-fixed assets which are termed risky and the other way. Secondly, nature of the person. An extra conservative person would largely want to be exposed to fixed income assets and vice-versa. And third will be income vis-a-vis expenditure. If one saves less, it's better that it goes into fixed income asset classes whereas the one who has less expenditure and more savings may have a higher exposure to risk. So based on this, one will have to break up in to fixed and non-fixed assets and further into equity, gold or real estate. Also, a person who is investing in equities on an ongoing basis but doesn't have time to monitor his full-time direct investments should take professional advice either through mutual funds or portfolio management services.

Which sectors you think will give higher returns this fiscal?
Higher returns are reaped over a longer period. Short term is for traders. I would suggest invest for medium to long term – minimum 9-12 months. And keeping that timeframe in mind, the sectors that will do well would be BFSI, export-led sectors like pharma, IT, auto, engineering and sectors sectors based on recovery expected in the economy – both by way of government measures and general– infrastructure, transportation and logistics.

Despite having high savings rate, investment in financial assets in India is a small part of the total GDP. What measures should be taken to increase it?
Have gold and real estate given more return than equities over a longer period of time? The answer is No. Are these two asset classes more stable than equity? No. This has to do with the Indian mindset. There is volatility in all the three asset classes, but when gold prices come down, nobody gets worried, on the contrary they buy more. Nobody calculates a CAGR, or annual return, on gold over the years. This is unfortunate because if you look at it gold has given lower returns over a longer period of time than equity and same goes with realty. Therefore, the perception of the people needs to be changed. Also, from economy point of view, purchasing gold is unproductive since it gets locked.

How beneficial are financial assets over physical ones?
Financial assets give you a regular income over a period of time unlike gold and realty, except in the case of leasing out property. Secondly, equity is an asset on which there is an overload of information via Sensex and Nifty. That doesn't hold true for real estate since it doesn't get tracked on a daily basis and thus the volatility in this asset doesn't get talked about that much. Also, in equities you can be sure of the receipt of payment once you have sold something, which is uncertain in real estate. Also, on a broader level, gold and realty payments are still made in cash and there are always questions on the sources of those cash, which is not the case with equities.

In rural India, gold remains an important savings option. What could be done to drive investment in other instruments for this unbanked sector of the country?
MF and PMS is a long way. Before that people need to have a basic bank account in which the Jan Dhan Yojana is proving to be quite helpful. Talking of the lower end of the people in economic terms, for them probably gold and real estate, both are not an option. Hence, financial inclusion programme initiated by the government is by far a good starting point and giving that part of society a financial asset class option could give returns in the long run. Once that is achieved, then we can look at cross-selling and other options.

MF assets crossed Rs 12 lakh crore zooming 31% last fiscal. What is the next step in giving a fillip to the distribution and sale of MFs?
If you look at the MF distribution in the past few years, the network has flourished from 10 to around 200 cities today. And similar is the case with insurance. So, the other thing apart that can be done is to push for financial literacy and let more information be available to the people, that will lead to more penetration.

Is the capping of commission of the MF agents a good move to curb mis-selling?
MF is a push product. And someone has to take the effort to make the people explain the benefits and features of it. If individuals don't see the compensation or reward for that hard work, then nobody will do that. I believe the trailing commission is a better option. Mostly as it disincentivises the advisor to not force investor to keep churning his money.

How do we bring back investor confidence in unit linked insurance schemes (Ulips)?
Earlier, ULIPs having high equity proportion saw their values fall in the falling market and that is where investors became cautious and lost interest because they are sold as kind of fixed return product. Hence, the clarity in terms of what exactly can be expected from the product will lead to recovery of the product sale.

The total exemption that an individual gets, post-budget, is Rs 440,000 in a year. What else is required from the government to give an impetus to financial investment?
More transparency should be adopted for investing in gold and real estate. The payment process for these two asset classes should be made mandatory via cheques. Though gradually they have been doing this, it has to be brought in parity with the equity.