Notwithstanding the recent challenges, one must note here that the long-term India growth story is still very much intact
We have completed the first month of the new financial year but there are two trends that have not changed from the last one.
First is the intensity of market volatility, and, the second is that largecap stocks continue to outperform the broader market due to elevated foreign investor (FII) buying. Midcap and Smallcap indices continue with their fall.
The election polling is over for almost 70 percent of the seats, and as the voting progresses it seems that the market perception for a stable government to come back to power is getting stronger.
It is also expected that a strong government in power with a renewed mandate would prioritise to boost the ailing economy. However, such expectations apart, the ground reality is far from that encouraging.
There is enough evidence of demand destruction in the economy as the volumes of sales growth in auto, FMCG and other discretionary consumption items have been falling significantly.
The liquidity shortage which has hit both housing and NBFC sectors is intensifying and now threatening to spread to other parts of the economy if not arrested immediately.
The global oil prices (India imports almost 70 percent of its domestic demand) have also firmed up by as much as 15 percent in the last 3 months.
And finally, despite two rate cuts by the RBI the cost of fund for doing business in the economy is just not coming down. At this current juncture, the moot question is, what should investors do?
Well, the first thing they should do is to assess their risk appetite with their investible fund. If one can afford to take risk and ready to commit his/her funds for the next 5 to 10 years then there are good opportunities available in the midcap space.
Notwithstanding the recent challenges, one must note here that the long-term India growth story is still very much intact.
If the Indian economy was to grow at a faster pace than the rest of the globe, then midcaps, which represent the domestic economic story much more strongly, is expected to outperform its large-cap peers in the next 5 to 10 years’ time frame.
However, investors must have the patience and risk appetite to venture in this space. But, if they need to be risk averse then debt funds may be a good option to consider at the current juncture.
(The author is Chief Investments Officer, Aegon Life Insurance)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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