March 17, 2022

 “The market does not trade upon what everybody knows, but upon what those with the best information can foresee” – William Hamilton

Russia-Ukraine conflict had clouded the stock markets worldwide giving speculations to the talks like possibilities of third world war, Russia heading for deep financial crisis, energy crisis looming large over Europe etc. With Russia-Ukraine conflict seems getting settled and much to the pleasure of Russia – the Super Power, this has now become a non-player for the markets until some significant deviation happens from the present stance taken by all major countries of the world.

Present is the world of instant. We want everything instant and so are our reactions. In the age of internetted social life, dissemination of information is highly fluid. And over 99% of these netizens have mastered the art of forwarding such information without verifying if it’s a news, noise or manipulated agenda of some interested parties.  

Most economies in the world including of India have seen high dosage of inflation after a very long time. Federal bank in US has gone ahead with its plan of increasing interest rates though at much softer pace. Other central banks will also be following in their footsteps. It will be very interesting to see how RBI addresses the concerns over inflation in its MPC meeting next month.

Crude prices that had shot over $140 a barrel have come down to two figure marks. Russia has even offered to sell oil at deep discounts to its friendly countries of upto 25% or even more. India has also shown interests in buying this discounted oil. In fact there are talks in circle that India may use the opportunity and buy stakes in Russian oil producing companies to secure its energy requirement over long term. These two factors themselves can have significant impact on the inflation apart from geopolitical concerns.

And there are many other positives that had been quoted many times like opening up of skies, increasing capacity utilization & GST collection, improving GDP numbers, credit off take etc. So have you really missed the bus? Hold on.

Opportunities never cease to exist and markets have to move up in the long run. The two are contradictory statements and are true at the same time. This is the very basic nature of the market. It surprises you with its reactions to the same news or event at different time. Federal bank raised interest rates yesterday. Now investors may withdraw from emerging markets and invest in US markets including in US debt. It should have negatively impacted the Indian markets. Instead markets are up over 1% because market participants were expecting Fed to increase rate by at least .5%. And this news had been playing for last over six months.

Russia Ukraine episode has given birth to the possibilities of new world order that will be multipolar in nature with some poles shifting tilt, suitable to their situation and strategy at that time. World may also see rise of new financial system that will challenge hegemony of western countries especially of USA.

While many countries are opening their skies, Corona virus seems to be raising its head again in countries like New Zealand, Australia, Japan, China, Mexico etc. And most surprisingly South Korea has reported over six lakhs new cases. And remember we are fast approaching April. Two year’s back we had lock down and last year was the worst April in the life of people who are alive today.

LIC’s much awaited mega IPO is around the corner. As the markets settle swinging upward, you will watch IPO advertisement with subscription dates in bold. It will suck anywhere between sixty to seventy thousands crores of liquidity from the market. It will introduce lakhs of new investors (LIC’s policy holders and agents) subscribing to shares for the first time. But still needs large support from financial institutions including FIIs. It will be interesting to see if FIIs bring in new funds or liquidate existing Indian investments to participate in this offer.

So it will be interesting to see the movement of inflation, RBI’s stance on policy rates next month, corona scare and participation of various categories of investors into LIC’s IPO.

What should you do – if you are following asset allocation method for creating your portfolio then just rebalance your portfolio whenever it deviates by over 5% from your desired allocation. And when you rebalance your portfolio use the opportunity to remove non-performers or an investment that has run its course.  Read Purify Your Portfolio in Holi Pyre and Splash It With New Colours This Falgun 🌈. If you are an all equity kind of investor, then we suggest having exposure of around 80-85% at this point of time.

Team InvestmentMitra wishes you and all your near & dear ones a very Happy Holi!

Happy Investing!

Team InvestmentMitra

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