Investment Tips: This year a special strategy should be adopted for investing in equity so that maximum profits can be earned.
Investment Tips: The equity market has performed well in the past decade due to easy availability of cash and rate cuts by central banks across the world. Talking about the last one year, the availability of sufficient cash in the economy was ensured to recover from the shocks of the Corona epidemic. However, now due to sufficient amount of cash to control rising inflation, central banks and governments around the world have indicated to gradually withdraw excess cash from the market. This can have an impact on the markets around the world including India. In such a situation, while making a strategy this year, long term investors should adopt a strategy of active management and multi-asset/asset allocation.
FD: Interest rates are increasing again on FD, but instead of investing in haste, adopt this strategy, returns will increase
Keep these things in mind while making strategy
The Indian market looks strong based on the current conditions valuations, cycles, triggers and sentiments.
- Valuation: The valuations of various asset classes are in a better position than the long time average. The trend so far has been that when an asset class is fully valued, it becomes volatile. Equity Valuation Index shows that valuations are not cheap and accordingly investors should invest for the long term and stick to asset allocation strictly.
- Bicycle: Companies have reduced their debt, the government’s fiscal deficit is under control and the cycle of non-performing financial sector debt is also under control. The government is increasing spending on infrastructure development and other sectors. Corporate earnings have increased in the second half of the current financial year 2021-22.
- Triggers: There is a need to keep an eye on US Fed rate hikes, US 10-year Treasury yields and the dangers of a new variant of Corona.
- Sentiments: Since the last six months, investors are adopting the strategy of investing in IPOs and are also investing money in expensive issues, which is a bad sign according to the sentiment.
Auto Sales: Passenger vehicle sales down 8% in January, but exports up 9.6% to 40787 units
Investors need to be careful in the medium term
- Equity market may perform better in the long term but investors need to be careful in the medium term.
- Looking at the current situation in the global and domestic markets, one can earn better profits in the short term by proactively adopting investment management and multi asset strategy.
- If you have high-risk assets in your portfolio, then this is a good time to reduce their weightage.
- Instead of focusing on just one asset class, one should adopt a strategy of investing in multiple asset classes. If you are thinking of investing only in equities, then which has the flexibility to invest in many companies and sectors.
- Talking about sector wise, you can invest in auto, bank, telecom and defense stocks. At the same time, caution should be taken about investing in consumer non-durables because even after the epidemic, this sector is struggling with consumption.
(Article: S Naren, ED & CIO, ICICI Prudential AMC)
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