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Election, Inflation News & Markets

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 “It’s important to learn what you need to know But it’s more important to learn what you don’t need to know.”

 

Stock markets absorbs all type of information be it political, social or economical. Many people were expecting markets to react differently following an impressive win of Congress party in Karnataka’s state assembly elections assuming it to be a mandate against the central government’s policies.

 

On the other side there have been so many positive news coming from economy, latest being consumer inflation at 4.7 in April apart from good corporate results, increasing manufacturing activities, capacity utilization, energy consumption,  GST collection, impressive growth in vehicles sale etc.

 

Post covid FIIs poured in handsome amount into Indian equities till around March 2021 that resulted in the phenomenal Bull Run before turning cautious and then negative from October 2021 on Indian markets. They remained negative till June 2022 and since then it had been a mixed bag with positive inflows this financial year for last about three months. Last couple of months has seen fund’s inflow of over 50 thousand crores from FIIs.

 

Opposed to that post covid DIIs were cautious till February 2021 with negative bias before turning net buyer from there and have been net buyers till March this year. One of the major reason for DIIs to remain net buyer was sustained flow of funds from domestic investors and majorly from retail through mutual funds, insurance, NPS etc.

 

It’s an interesting fact to note that markets were as usual in bull run till October 2021 as long as FII were pouring in money and since then had been range bound before moving upward from last week of March 2023. You would recall in our communications during this period we had been cautioning you with occasional suggestion to increase equity exposure like last June or mid-March this year.

 

When we look at the economy related parameters there are a lot of comforting factors. Like inflation is below 5% now, bank’s NPA has come down drastically from close to 15% in 2018 to well around 4% now, manufacturing activity picking up. An interesting factor that made news headlines that despite cool May where ACs in most houses were hardly used, overall electricity consumption compared to last year’s May was much higher.

RBI will be contemplating on its Bi-monthly monetary policy this week. The whole academia and trade bodies are eagerly waiting for its outcome. With inflation under control, we believe that RBI will maintain status quo on repo rates and wait for some more time to reduce it. It may provide some relief to the financial system and infuse liquidity.

 

Globally European economies don’t seem to be in good health. US economy is also facing one of its worst period of modern era. US government just averted default on debt. Economic slowdown is more of a phenomena of developed economies and those who had heay trade surplus. Otherwise small developing nations seems to doing OK. And among all India had been a shining star in the world. It’s more because of our demographic dividends and being a trade deficit country. Increasing infrastructure spending and strong inclination to become “Self dependant India” has put it in a different league. India is expected to contribute around 15% of world economy.

 

Market wise also with market PE 21.6 and market cap to GDP 91.93%, NSE seems fairly valued. As far as political situations are concerned, they won’t much difference to whole economic system. Whether present government stays in power or not, reforms will not take backseat, at most pace of growth can slow down a bit. So any correction here should be seen as a good opportunity rather any folly. So stay invested and increase exposure whenever there is small correction of around 4-5% in the broader index.

 

Investment Opportunity – Apart from mutual funds there are many investment opportunity among RBI & SEBI regulated products that offers opportunity to earn decent returns over short to long period. Like you may consider peer to peer lending, regulated by RBI to earn upto 6 to 10% interest over 1-12 months period. Or on a higher risk side, you may consider investing in startup companies through SEBI regulated Angel Fund that can multiply your investment 10X or more over 10 years. If you need funds for short to medium term, you can also consider taking loan against your mutual funds, shares or insurance policies at nominal interest rates and avoid redeeming your investments and et them grow with the market.

 

Please let us know for any query or discussion. You may write to contact@investmentmitra.com or whatsapp to 9958447700.

 

Happy Investing!

Team InvestmentMitra

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