Plain-vanilla fixed deposit investments beat most asset classes in 2018

Plain-vanilla fixed deposit investments beat most asset classes in 2018
  • 1

New Delhi, Dec 26: An investor who put his money into a fixed deposit would have outperformed most asset classes this year.
Equity, real estate, and even actively-managed debt funds have given lower returns than the State Bank of India one-year fixed deposit returns in 2018. Gold gave marginally higher returns, but that too was in line with what many public sector and private sector banks offered.
Experts say there is limited visibility on debt in 2019, while also pointing to uncertainty in other asset classes, with real estate under pressure on funding issues and equities being hostage to election volatility. Gold, though, may be a relative oasis of safety.
Chirag Mehta, senior fund manager – alternative investments, who handles gold schemes for Quantum Asset Management Company, says returns for the yellow metal are expected to be positive in light of economic headwinds globally. While sharp returns are not expected, it will end at a higher level than it is currently, he predicts. “Most of the gains will likely materialise in the second half of the year,” he said.
Gold gave returns of 6.8 per cent in 2018, according to the India Bullion and Jewellers Association’s figures as of December 21.
The figures till December 24 showed that equity returns ranged between 1.26 per cent for Nifty in 2018 and 4.15 per cent for the Sensex. Most equity mutual funds did worse than the leading indices. For large-cap funds, one-year returns are slightly below zero, according to Value Research data, while mid-caps and small-cap funds have lost around 12 per cent and 20 per cent, respectively.
Experts tracking equities point out that there is more hope on earnings, though elections can bring in a fair amount of volatility. V K Sharma, head of business, private client group at HDFC Securities, says that prospects for the markets are likely to only look up in light of improving fundamentals. HDFC Securities has a calendar year target of 12,400 points for the Nifty 50 index.
A number of debt funds have faced losses in 2018 because of their exposure to finance major Infrastructure Leasing & Financial Services (IL&FS). The institution, with over Rs 900 billion in outstanding debt, began to default on its obligations in September, catching off guard many funds that had invested in this highly rated institution.