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Two Sides of a Coin – Which One Do You See

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 "A market is the combined behavior of thousands of people responding to information, misinformation, and whim." - Kenneth Chang

Every coin has two sides and we can’t see both the sides at the same time. Similar is the interpretation of news, information or data. Like, over past three months FIIs have pumped in more than 1.4 lakh crores into Indian stock markets which helped Largecap indices gain over 15%. This is one side of the story. Last week same FIIs withdrew around 10,000 crores from Indian stock markets due to rising bond yields in USA. Indian stock markets also fell by around 5% before showing recovery on Friday and now at the time of writing this blog. – This is another side of the story.

We have seen inflation data that has very much been within the tolerance range of RBI. But for almost a month food inflation is on the rise especially of fruits and vegetables. You must have been receiving a lot of memes around tomatoes. Same dilemma – how do you interpret such information?

RBI’s Monetary Policy - This week RBI will announce its bi-monthly monetary policy review. Heavy rains flooding of most parts of the country and causing disruption in supply of agri-commodities especially of fruits and vegetables, may concern the policy makers. Evaluating overall economic situation and inflation pattern, we at InvestmentMitra we feel that RBI will continue its mandate of pause on interest rates may be with a hawkish stance. As maintained in many of our previous blogs, RBI may lower its policy rates around December or post general elections in May last year.

Geo-political issues remains the same with more and more countries getting concerned over Russia-Ukraine war and trying to find a solution to it. Meeting of NSAs and diplomats from over 40 countries in Jeddah clearly shows the rising concern as well as the efforts.

Indian economy is showing good strength with better corporate results, lower NPAs reported by banks and financial institutions, rising infra spending, capacity utilization, energy usage etc. Globally also US has shown improving employment data, a small increase in GDP, lowering inflation etc. European Union has also shown marginal increase in their GDP. The GDP increase in US or Europe may not be of much significance but important point to note is that it is not diminishing either. We can expect both economies coming out of red within next 1-2 years.

Stock Markets - Except for the sharp rise in last four months there seems not much of concern from Indian stock markets. Earnings are improving, economy is growing at steady rates, policies are getting more and more favorable, investor’s sentiment is positive, volatility index is at all time low. With respect to market valuations, compare Nifty at 18,400 with P/E of 28 in October 2021 with current nifty at 19,500 with P/E of 22.71 – which is costlier.

Contact your Investment-Mitra to know and understand what action you should take in your portfolio. You may drop a message on whatsapp at 9958447700 or write to contact@investmentmitra.com.  

Please remember while markets and events are same for every investor but the investment solutions will differ depending on individual financial needs and situations.

Thank you.

Happy Investing!                                                                                                               

Team InvestmentMitra

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