Bottomline | A not so merry Christmas for investors

We already have a perspective on equities. Now let’s consider debt. Unless you invested in fixed deposits or intend to hold your debt instruments till maturity, Christmas 2022 would have been a bad year for you. Remember, the value of a traded bond declines in a rising interest rate environment to adjust to the higher yield, and this can lead to a capital loss for investors. The 10-year Government bond 2032, for instance, is down over 5 percent since last Christmas.

But what has glittered in 2022 clearly is gold for Indians. A strong dollar has provided a big fillip to gold returns in rupees, with a gain of 9.5 percent since last December, even as gold in dollar terms is 0.3 percent lower than last year.

But the big turnaround this year was in the Indian realty sector, which has emerged from a long bear phase. Residential property values across cities perked up in 2022, and most experts have been opining that this could well be the start of a multi-year upcycle in realty, suggesting more gains ahead.

In 2022, the gains in real estate have been secular but varied across cities. Ahmedabad, not surprisingly, has emerged as the top market for returns among top cities with an increase in property values by almost 11 percent as of September 2022. Gurgugram, the Delhi suburb, is next in line with a return of 8.4 percent, followed closely by Hyderabad and Chennai. Bangalore, despite the I.T. tailwind, has seen prices rise a lesser 5 percent.

Given this, realty and gold have been the better asset classes to be in through 2022, but 2023 may not be a similar story.

The current global environment is fraught with uncertainties and this makes 2023 pregnant with possibilities. A sharp slide in equities could provide an attractive entry point for long-term investors while rising interest rates could offer an attractive return to lock into for the years to come. An extended period of uncertainty and heightened volatility in the currency markets could keep gold attractive, while a peaking of interest rates shortly in India—as widely envisaged—can keep the tailwind behind realty.

2023 will offer opportunities for sure, and there’s more than a good chance that next Christmas will bring a lot of cheer for investors. But be nimble to make the most.

Merry Christmas!