“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it” – Warren Buffett
Black swan event of corona forced stock markets to fell by over 40% in March 2020. Lock down was imposed in most parts of the world and the economy at one point had seemingly come to a halt. From there on people learnt on how to live with this scare and economies started recovering. Stock markets either lead or lag the economical indicators. This time they preceded the recovery in economy and stock markets not only staged phenomenal recovery but followed it with a strong bull run over next 1.5 years.
Economies have staged full recoveries and most economic indicators are encouraging except that of inflation. Volatility in markets over last six months doesn’t suggest so. So it is perhaps not very rational to link stock market movements with growth rate in economy in short period. In short period market movements are influenced more by sentiments of people participating in it than actual economic events.
Corona has been playing snakes and ladders for quite some time now. The moment the society and the health infra start getting the feeling that covid is under control – a new and scarier variant emerges. And soon, talks of lock-down starts doing the rounds in the society. At the same time the government and the industry has also learnt on how to cope up with the same and continue the activities, may be at a little slower pace.
Usually summer season is the period of higher inflation, for low agricultural & dairy activity/output – fuelling food inflation, and high consumption of energy. Presently high inflation can be attributed to this seasonal impact, uncertainty over crude prices due to ongoing war, high liquidity that was thrown into the system by central banks to save their economies going into recession which is now being sucked back, have cumulatively impacted the inflation and this is going to stay for some time. Impact may be different on different economies based on their strength. We expect India to show resilience compare to other major economies of the world.
Russian Ukraine war has now crossed over into third month. Will it draw more parties into conflict or when it will cease – it’s still a far guess. While it is still a matter of concern but at the same time it has also offered many opportunities for India. Indian government so far has shown tremendous steal in its foreign policy and handling the situation. It will be interesting to see how they use the opportunity to benefit its economy especially securing energy and defence requirement and export of agricultural products.
RBI in its first MPC meeting for FY2022, decided not to raise repo ratesagainst a much expected interest rate hike of 25 or 50 basis points. It will have to raise interest rates sooner or later as inflation is expected to remain high for some time now.
Corporate results for last quarter had been a mixed bag, many of them lacking the market expectations. Their annual results will be out soon. And it will be very interesting to see how they perform against market expectation. Monsoon is predicted to be normal this year.
Highly awaited LIC’s IPO has arrived. Government has played smart by bringing down the size of the IPO. Now the government intends to collect over 20.5 thousand crores from sale of their share through this IPO instead of much touted 65 thousand crores. The IPO, despite the biggest so far for the Indian markets will sail through smoothly. In most likelihood the government will follow up it with raising good amount by selling its stake to FPIs using provisions of the recently amended LIC act.
What should you do now – Keep your money handy and take advantage of every market correction of around 7-8% from their peaks. Key for any HNI investor is Never run out of cash. Even BAF schemes are good to park money for 2-3 years or the money you want to invest into equity. Right asset allocation and periodically rebalancing it, is very important to earn the desired returns.
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