Wealth Forum invited 350 of India’s leading IFAs from 46 cities to participate in the 7th edition of the Wealth Forum Advisor Confidence Survey 2018, which was conducted in July 2018. All invited IFAs form part of the top 5% of IFAs in respective cities. We received responses from 243 leading IFAs from 45 cities, which has been compiled into a comprehensive survey report.

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This is an extract that reproduces the Market Confidence Section of the survey report. India’s leading IFAs are preparing for zero support from equity and debt markets for the rest of this fiscal.

Equity markets: 0% index return for next 8 months

As we write this report (Aug 1st week, 2018), the Sensex is hovering around the 37,000 mark. India’s leading IFAs don’t see the Sensex rising beyond this level over the next 8 months – sideways is the prediction going forward. Only 25% believe the market can go to the next band higher (37,500 – 40,000), while most feel it will either remain in the current band or drift down to a band lower. If large caps aren’t expected to steam ahead and midcaps are struggling to come out of their corrective phase, it sure looks like equity returns in the near term are going to be quite challenging.

One should take the views of our IFA leaders very seriously – they seem to have got their forecasts right almost every year, including last year. Last year, their average Sensex forecast for March 2018 was 33,185, which was one band higher than at the time of the survey – and they were pretty much bang on target with Sensex closing on 28th March 2018 at 32,969 (0.7% off target).

Debt market: No respite seen

India’s leading IFAs see no respite on the interest rate front, with an average 10yr G Sec yield forecast at 7.87% by March 2019, up marginally from 7.70% at the time of writing this report (Aug 1st week, 2018). 43% believe yields will remain in the current band (7.5% - 8.0%) while a substantial 38% believe it will rise further into the next band (8.0% - 8.5%). There are very few takers for a bull case for bonds, at least in the near term.

Our IFA champions may be equity pundits, but like most bond fund managers, they too mis-read the fixed income market over the last 12 months. Their forecast for March 2018, at 6.47%, was way off the mark, with the 10 yr G Sec yields coming in at 7.4% by end of March 2018.

Rupee: more pain ahead

The Indian rupee is likely to depreciate further against the USD in the coming months, in the opinion of IFA leaders. A majority expect it to move to the next trading band of 69-72 by March 2019. While that may be good for export oriented businesses, its not comforting from an inflation and fiscal deficit point of view, nor a source of comfort on FII flows.

The overall picture emerging on market confidence is circumspection and caution, which replaces the optimism seen in recent years. If our IFA leaders are right, don’t expect market tailwinds to support you in the months ahead. There’s work to be done to engage with investors who came in over the last 12 months to soothe any ruffled feathers. There’s work to be done to convince new investors about the long term story and not look only at the last quarter’s market moves to decide on allocations. And for those advisors who believe in tactical asset allocation, there’s some work to do in deciding how to orient client portfolios amidst these market perspectives.

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