Is it time to change your portfolio mix?

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Is it time to change your portfolio mix?
With interest rates on debt instruments rising and the Sensex and the Nifty hitting multi-year highs recently, is it time change your portfolio mix?

Asset allocation and their changes are always very tricky, so it always makes sense to see if you have been getting the returns that you had anticipated.

If you have a good exposure to equity it might make sense to sell and shift a part of it to debt, at least till the General Elections are out of the way by May 2014.

The Sensex is near its multi-year highs and the risk to reward ratio from here on, is certainly not in favour of equities. Most analysts feel that Indian equities at the moment are fairly priced as per long term averages and substantial gains from here on are ruled out, considering diminishing growth prospects for companies.

On the other hand interest rates are rising and debt schemes are now offering pretty decent returns. Some NCDs currently available for subscription are offering you interest rates as high as 11.75 per cent.

On the other hand those in the high tax bracket of 20 and 30 per cent can get pre-tax yields of as much as 10-11 per cent in some of the tax free bonds. Interest rates are now rather attractive then what they were in the last few months and hence it makes sense to partially shift from equities to debt.

What about gold?

Gold is set to fall for the first time in 12 years. Gold rallies when there is bad news around and global economic recovery that has taken shape in the last few quarters, does not augur well for gold.

It's unlikely that gold will rally sharply unless there are geo-political tensions or unless growth rates around the globe fall off a cliff or Greece like problems re-surface.

Gold demand is likely to remain subdued, particularly in view of the Indian government's desire to curb gold demand in view of the rising current account deficit.

Gold may trade rangebound in the next few months and hence may not offer superlative returns.

Story first published: Wednesday, October 9, 2013, 8:44 [IST]
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