Since the beginning of this year, volatility is being seen in the global and Indian market. In view of the continuous increase in inflation, central banks around the world have increased interest rates significantly and are trying to control it. However, if you compare with foreign markets, then India’s economy is comparatively more stable. Compared to other emerging economies, the performance of the Indian market has been better in one or five years. Talking about equity valuations, India’s long term average has also been better than other markets. However, despite all this, there is a need to be risk conscious as market valuations are not cheap.
Nimesh Shah, MD and CEO, ICICI Prudential Mutual Fund says that the markets around the world are inter-connected and in this sense, if there is any problem in the world, then the journey is so easy for those investing in the stock market in India too. Can’t be either. We believe that when the US Fed announces that currency has been dealt with strictly, it will be a great opportunity for equities to emerge as a major asset class. We do not know when this will happen and till then we expect the market to remain volatile.
Shah said that despite the developed economies going through an economic recession or recession, there will be no significant impact on India. In fact, the coming recession in the developed countries of the world can reduce some of India’s challenges. For example, we can also benefit from high oil prices, concerns about current account deficit and inflation. Even if there is a fall in the stock market, then we do not need to worry too much. In fact Indian market is structurally strong.
We all understand the condition of the Indian market as compared to the current global markets, now let’s talk about what an individual investor should keep in mind and what should be included in his investment portfolio in such market conditions. Shah has given the following suggestions to investors.
News Reels
Invest in Debt Mutual Funds
Debt mutual funds have not become popular yet. However, given the higher yields over time, debt as an asset class is again looking attractive. According to Shah, there will be an increase in the repo rate in the upcoming meetings of the Reserve Bank as the prices of consumer goods are high and this has posed a challenge to the RBI. Therefore, in future, high accrual schemes and schemes with dynamic duration can prove to be a profitable deal. Floating rate bonds ie FRBs can also do well in future. Investors should note that debt mutual funds play a very important role in the portfolio and should not be ignored.
Take support of Systematic Investment Plan
As long as the US Federal Reserve is resorting to all available options to control inflation, the ups and downs in the market will continue. Shah says that investors should ideally invest in equity mutual funds through a Systematic Investment Plan (SIP) with a time horizon of three to five years, given the volatility of the market. Features like Booster SIP, Booster STP, Freedom SIP or Freedom SWP can also be considered to achieve various financial goals in a planned, disciplined and systematic manner.
Include Gold and Silver ETFs in your portfolio
The risk associated with investing in a diversified portfolio is reduced. Diversified portfolio ensures that the concentration risk is minimized. Given the uncertainty, gold and silver can be good investment options. Shah says that they not only act as a hedge against inflation, but also against currency depreciation. You can consider investing in gold and silver through ETFs (Exchange Traded Funds). For those who do not have a demat account, gold or silver fund of funds can be an investment option.