Investment behaviour and preferences keep changing in tandem with the market movements and the course of the economy. Investment advisers who read them correctly are better equipped to offer clients thematic solutions for achieving their financial goals and objectives.
A recent survey undertaken by financial services solutions provider The Continental Group points to major investment trends that will dominate the market in the future. It highlight megatrends, thematic equities, and wider adoption of smart technologies as shaping the post-pandemic investment ecosystem.
Seven in 10 respondents agreed that technology trends such as artificial intelligence, robotics and associated services are the major themes that will dominate investments.
A quarter of respondents opted for ESG (environmental, social and governance) impact investing; while a small fraction (3%) opted for safety-related domains. Most respondents agreed about the long-term growth potential of thematic investments under equity and fixed income space.
- In the current investment climate, diversified approaches within specific risk bands can help build durable portfolios;
- Employing traditional bond and equity strategies mean that investors may not get the type of returns they are hoping for;
- ESG will find greater acceptance in general asset allocation;
- Thematic investing can be an attractive source of alpha, but investors can be slow to recognise thematic drivers and may not unlock the power of a theme with long-term growth;
- Explore investment avenues across the value chain of themes;
- With the meteoric increase in connected devices — all generating more and more data — the technology theme holds promise, especially within the context of AI and robotics.
Uptick after downturn
Neelam Verma, vice president and head of investments with The Continental Group, said the findings were based on a recent webinar discussion and a poll bringing leading voices in the financial industry together, to share their expertise, and demystify the market forces influencing post-pandemic investments.
“There has been a recent uptick in investment activity after a prolonged downturn due to the pandemic. We have noticed that life in pandemic is the new normal for most investors. Investors are looking beyond bank deposits which was a short-term phenomenon at the advent of the covid-19.
The new wave is also accompanied by a renewed market outlook, increased focus on AI and robotics, and an accelerated shift towards thematic investments,” she said.
Esty Dwek, head of global market strategy at Natixis, said: “As opposed to conventional investment instruments, thematic equities and ESG-related funds proved to be more resilient against pandemic headwinds. This was a precursor to the broader shift towards megatrends around investments in the areas of environment, water security, green cities, and AI, which have significant long-term relevance.”
Indian Markets have been maintaining a bullish and optimistic outlook over past 18 months. The quick economic revival post unlock 2.0, strong economic data, improved corporate performance over the previous year, expectation of a large number of adult population getting vaccinated, high participation of retail investors both on mutual funds and IPOs have given an impetus to the Indian stock markets
The fundamentals remain strong in India which has led to a positive momentum in the broad markets which is expected to continue. Both smart money and retail money has been free flowing in the market despite concerns of overvaluation as the fear of losing out on the returns dominates the market sentiment.
Any political news or a third covid wave may play spoilsport and cause disruption in the momentum and lead to correction causing losses to investors.
“Our advice to investors is to exercise caution, stay within their risk tolerance limits and take financial advise/guidance from their financial advisors on their investments,” Verma said.
“Our advice to NRI investors is to diversify their portfolio, stay focused on their asset allocation, book profits as per their set targets, avoid greed under peer pressure and not to elevate their risk levels due to the market rallies.
“Diversified portfolio of mutual funds including multi asset funds, and direct equities should be a part of an NRI portfolio,” Verma said.