If you look at the past two months specifically,global equities rallied strongly in November, mainly due to several vaccines proving effective against Covid-19. The improved risk appetite saw corporate bonds outperform government bonds. Buoyed by surplus global liquidity and weaken dollar, foreign fund inflow into Indian equities touched record levels in November, surpassing the Rs 50,000-crore mark for the first time. These factors have proved to be extremely positive for the stock markets and moving forward, the expectation is that the stock market valuations shall continue, and the rally is expected to hold.

I see a lot of people shying away from mid-cap and small-cap stocks, but their performance has been largely positive especially in the month of November. In the month of November, the benchmark index Nifty surged 11% largely led by financials. In comparison, bothmid-cap and small-cap index have outperformed Nifty. The mid-cap index rose 15% whereas Small cap index gain 13%. In terms of valuation, a lot of mid-cap and small-cap stocks have lot of upside potential left.

In the second quarter of FY21, we have witnessed a better than anticipated recovery in GDP coming at 7.5%, against the broad consensus at -8.5%. There has been a headline recovery in the second quarter which is quite noteworthy. Here are some of the positive factors

• Active covid-19 cases are consistently declining
• Healthy kharif sowing
• Improvement in liquidity conditions and
• Resilience of Indian economy

Notwithstanding Q2, one should remain cognizant about the following risks:

• Fading global demand reflecting on exports performance
• Rise in demand-supply wedge under MGNREGA and sentiment on the rural front
• Government exercising fiscal austerity
• Lack of credit and
• Lack of animal spirits

FY21 GDP is now estimated at -7.5%

If you look at the last few policies by the RBI, you will find that the RBI has continued to remain cautious on the inflation and in the recent policy we could find that it has remained a little optimistic on the growth side, thereby holding the repo rate at 4%. Going forward, it is our opinion that the RBIs will continue to enhance the liquidity for the targeted stressed sectors and the currency markets are likely to take a cue from this.

It is difficult to put a number on Nifty returns for the next year. My view is that investors should not expect the repeat of what happened to Nifty in the past few months. It is best to have reasonable expectations from the market in 2021. Stick to your asset allocation and rebalance your portfolio by booking profits at regular levels. Your asset allocation is your best guide.

Attributes of a good quality stock are as follows:

• Quality and vision of Management
• Strong ethics and corporate governance
• Potential for future growth
• Company’s competitive strength
• Long-term strength and stability
• Debt-to-equity ratio in line with industry norms
• Price-earnings ratio can help provide market value

The strategy for long term should be not to panic with short-term market blips. Market movements are never linear, and a correction follows a peak. However, it’s vital to take into account the big picture and remain committed to your investments. A periodical review is equally important to identify laggards and weed them out.

The global pandemic coupled with falling interest rates had a significant role to play in the recent gold rally. It definitely makes sense to invest in the yellow metal as it’s a hedge against inflation. An allocation of 10-20% of the total portfolio value will certainly add value in the long run.

I prefer investing in sovereign gold bonds rather than physical gold which has issues related to purity, high making charges and storage, among others. These bonds are issued by the government at the existing gold prices with a tenure of 8 years.Interest is paid @ 2.5% p.a.These bonds can be sold after a lock-in of 5 years and if held till maturity, the capital gain is tax-free. Alternatively, you can also invest in Gold ETFs and Gold funds as they are available on the tap.

Be patient. If your portfolio is well-diversified with quality holdings, it will improve with time. If the fundamentals are strong, gains are not far away. Avoid being impulsive and take any rash decisions.

Booking profits depends on whether your target price for a stock has been reached. If not, it’s better to stay put. Additionally,see if your exposure to equity is more than what is warranted by asset allocation. If yes, then certainly book profits and reduce the same.

I firmly believe that you must look at these parameters while choosing the fund you wish to invest in:

• Your financial goal and risk appetite
• Investment horizon - the duration for which you want to remain invested
• Core holdings of the fund
• Long-term performance of the fund vis-à-vis benchmark index and peers

No, it doesn’t. In fact, it’s one of the most common misconceptions that people have regarding mutual fund investment. NAV or net asset value is the price at which you purchase units from mutual fund houses, and it’s calculated by dividing the total value of an asset in a portfolio. Instead, look at the quality of the underlying holdings. It’s the portfolio and not the NAV that generates return.

If you have the required knowledge about stock markets and can track and analyse market movements, you can invest in stocks directly. On the other hand, if you want diversification and gain from the expertise of the fund manager, then it’s prudent to opt for the mutual fund route. If you go with mutual fund, follow the systematic investment plan (SIP). This approach will further help you in lowering the risk associated with equity investing.

Markets are overvalued at the moment, and a near term correction can’t be ruled out. You may invest a lump sum, but it’s better to invest in a staggered manner. Further, diversify your investments across asset classes. You may even consider balanced advantage funds that dynamically adjust equity and debt component as per the prevailing conditions.

While investing in debt instruments, you must follow the SLR (Safety, liquidity and return) principle. So, first gauge the safety of the debt instrument, followed by liquidity and then look at returns. You need to build a portfolio that is not only safe but also generated average return that exceeds inflation. To achieve this objective, you will have to create a mixed portfolio of bank FD, high quality AAA & AA rated bonds and NCDs. You may consider liquid funds for liquidity. If you are a senior citizen, then Senior Citizen Savings Scheme can also be considered.

You should have a separate health insurance and critical illness cover. A family floater plan offers coverage to all the members of a family while a critical illness plan covers you financially from high costs of treatment of critical ailments.

Because of the pandemic, the government extended the date for making tax-savings investments for FY 19-20 to July 31, 2020. In the income tax form, the new schedule DI enables you to claim exemptions on investments that you have made during the extended period, up to June 30, 2020.

Be careful while filling up this section and avoid mentioning investments that you want to claim exemption for in the current financial year.

Offshore mutual funds are schemes that invest in international markets. They are a good option to gain geographical diversification and participate in growth stories of foreign companies.

Offshore funds help in reducing country specific risk. If domestic markets underperform, chances are that offshore may be outperforming. Investing in offshore funds can help you shore up returns.