1. Real Estate
The year 2013 was not really great when it came to investing in real estate. Prime areas in Mumbai actually saw a fall of around 10 percent, while the suburbs managed to maintain the price range. Real estate is a difficult business to understand. Since developers are holding on to the stocks and are not allowing prices to fall, we believe that the real estate market will remain flat till interest rates actually come down. There is some hope in low-cost housing that is far away from the city centre, but again this segment is also very sensitive to interest rates. Investors can make good returns from these projects but they can also be risky. Prime-locality investment is not expected to yield returns for 2014.
2. Equity: Mid-caps
The year 2013 has been particularly bad for the segment due to the dismal macro picture of the economy. The NSE Mid-cap index is down 10 percent over the last one year. High interest rates, a plunging rupee and other global factors played havoc with the segment, as all the international investors decided to park themselves into the large cap companies that are part of the Nifty. Till September 2013, on a year-to-date basis (from January 2013), Mid-caps were down 23 percent and the Nifty was down by 10 percent.
In the new year, India will be getting into election mode. A lot depends on the election results. If things turn out right, investors are expecting the broad indices to go up by around 20 percent. And if that happens, there is a chance that Mid-caps will actually do better than the Sensex/Nifty.
3. Fixed Income
Interest rates are at their peak. This is probably the best time to buy long-dated securities through mutual funds or invest directly into government bonds. There is a view that 2014 will see some fall in interest rates and that will give a booster to bond prices. Investors can also park their funds in various fixed deposit schemes that are offering interest rates of around 9.25 percent or go for fixed maturity plans offered by mutual funds.
4. Investing Abroad
Those who invested in the US markets managed to get high returns on the back of a healthy US stock market recovery. Some of the funds have returned 60 to 70 percent over the last year. These investors benefited both because of the buoyant American economy and also the depreciating Indian economy. Take, for example, the FT US Feeder Fund which returned around 63 percent over the last one year. Others who invested into the Asian markets, which include the Philippines, Thailand and South Korea, also saw higher returns. It will be a good idea to keep a portion of your portfolio invested in the US market-in case of a meltdown, it will act as a hedge against a falling rupee.
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