“Cash combined with courage in a time of crisis is priceless.” – Warren Buffett
With 2021 coming to end, now is the time to take stock of the year gone by and plan for the year ahead i.e. for 2022. On fundamentals Indian economy has crossed the pre-covid peaks. Bank’s NPA are reducing, capacity utilization, GST & direct tax collection, corporate earnings etc. are quite satisfactory. Just one word Covid or its Omicron variant changes the mood of the analysts.
Most of the pandemics emanated from poor or developing nations. But corona had turned the table. It started from China and spread through developed nations particularly US & Europe before engulfing the whole world.
Its new Omicron variant is repeating the same pattern. And number of active cases and deaths due to covid are on the rise again. India thus far is best placed in terms of new cases and covid mortality. But the way it is increasing among the developed nations definitely mandates extra ordinary precautions especially knowing the population-density and ensuing state elections here.
Many state governments have already started putting curbs on public movements which will further get stricter with worsening situation. More than the covid, the curbs on economic activities will negatively impact the economy and the stock markets. And the kind of unemployment it may generate will be quite difficult to manage this time.
Markets had technically corrected by over 10% from their peaks before rallying again. Stock market rallies over past two years can largely be attributed to high liquidity available in the economies than their growth. Domestic investors have committed large regular money through mutual fund SIPs, ULIPs (insurance), NPS, PF trust etc. Foreign investors though redeemed large amounts from the secondary markets but invested much higher amounts in primary markets through IPOs, which signals that they are here to stay.
While in medium to long term we are bullish on the markets but for short term we suggest you to be cautious over next 1-2 months. The main event that needs to be closely watched is movement of corona over next 15-30 days, Indian budget, inflation data and monetary policy review by RBI.
Team InvestmentMitra wishes you a very happy, healthy and prosperous year 2022 !