In the last decade when I still used to do television shows, I once suggested to the Channel Head that getting ‘expert’ guests to discuss which of their forecasts for the year turned out right and which did not, might be interesting. His candid response was that it would be a sure-fire way to scare off guests on his channel.
I was and still am willing to Walk the Talk and so, here’s what I said in 2025 with what happened in Reality (highlighted in Italics) …………..
The most popular asset class in India, even today remains debt. With the increase in bank interest rates in recent times, the traditional avenue of Bank Fixed Deposits has witnessed a revival of sorts and fixed income investors have rushed in to lock in high interest yielding deposits for longer tenures.
There is also concern among these investors that at some point, interest rate cuts will commence and trigger a sharp fall in bank interest rates.(FD interest rates have dropped as anticipated). That bank interest rates are a function of the inflation rate and it is important always to look at interest rates as net of inflation is often missed by investors.
Debt mutual funds whose USP was its tax arbitrage over its alternatives took a hard blow in the last Union Budget which withdrew its tax advantage. Simply put, the mutual fund industry will need to re-calibrate to make their debt mutual fund holdings more palatable to investors. (The Mutual Fund industry has developed quasi-debt offerings with equity tax benefits for investors who hold these units for a minimum of 24 months). Even the insurance industry took a beating in the earlier Budget when its tax free tag for premium payments in excess of Rs.2.5 lakh, was withdrawn. There is also a plethora of traditional savings offerings from the government, albeit with investment caps which still remain popular among investors.
Yet another popular sub-asset class in India especially, is Gold. With gold prices rising to new highs, there are concerns of it entering a price bubble territory. However, the ongoing hostilities in some parts of the world as well as aggressive posturing by nations with powerful armies, ensures that gold as the asset class of last recourse remains in demand. (This forecast played out most accurately as two more wars broke out during the year and the US dollar weakened. It is worth noting here that four of the six nations involved in these war-theatres have proven nuclear capability.)
In the next column, we will look at the remaining viewpoints and forecasts which I presented in my column at the start of 2025 and how they actually played out during the year. These include Crypto-Currencies which remained volatile and Indian Equities that finally took a pause after a uni-directional 3-4 year run.
(Ashok Kumar heads LKW India. The views expressed here are his own)