Rate hikes, inflation, and capital markets!
19th June, 2022
The US Fed's mega 75 bps rate hike announced on 15th June '22 was the biggest in nearly 30 years. Given the imminent need to tame inflation, it was not surprising at all.
Should all this worry investors? Should investors start doubting their Equity investments?
Well, unlike popular opinion, I say NO. Through my content and insights, my endeavour has always been to help investors make well informed decisions. The current market scenario is tough, sure, but it is an opportunity. An opportunity to buy the right stocks at right prices. Given the current market fall, a lot of good stocks are available at attractive valuations, making Equity investments attractive at this point of time.
This thought-process is very well being validated by the DIIs.
Investments by DIIs in the Indian stock market have crossed the Rs 2 trillion mark, so far in 2022.
With still six-and-a-half months to go in the year of 2022, investments by DIIs in the equity market is the highest ever in a single calendar year.
Sure, Indian indices have fallen on the back of strong selling by FIIs in the past few months. But, this has indeed helped in making the valuations more attractive. Also, bear in mind that there haven’t been significant earnings downgrades yet.
Rising inflation, rising interest rates, expected recession in the US, and the prolonged war is keeping the bulls away from the market, which today is in the grip of the traders. But, we will soon witness early signs of investors getting active as over sold businesses see heavy buying.
And, in such a blue mood, the government measures such as cutting excise on fuel and curbing exports in some commodities bring the hope of prices cooling off. Manufacturers are stumbling over supply chain bottlenecks, but demand is picking up to reach pre-Covid levels and the expectation of a strong economic growth despite these headwinds is what keeps us going.
The International Monetary Fund has projected that India’s gross domestic product will grow at 8.2% in 2022. This makes it the fastest-growing major economy in the world, almost twice faster than China’s 4.4%.
It’s time we see this decade as a golden decade. To stress on that point, here’s 8 data points to show you a comparison of where our economy stands today v/s 8 years ago - in 2014 vis-a-vis today.
This data simply acknowledges the fact that one should take advantage of this opportunistically and have a long term vision in mind. Such positive indicators only go on to show that INDIA presents an opportunity for wealth creation but, through RIGHT INVESTMENT DECISIONS!
Given the heights that valuations had reached, correction that we are seeing is HEALTHY and long term investors should not worry, as equity investing is all about patience, and conviction over a long period of time. Do not give heed to short-term hiccups; rather, consider the correction as an opportunity!
Stay safe, stay invested!
Check out: FinWeek’s Economically Yours, a financial podcast.
Listen on: Spotify, Google Podcasts, iTunes, or Anchor.
To leave a comment or to start a discussion, please visit the blog.