Volatile Indian Markets.

What's happening & 3 factors you should consider

Current Events:

• Benchmark stock indices are witnessing steep corrections as investors remain concerned about the rapid growth of Omicron
• Add to this, the US Federal Reserve’s plan to raise interest rates from 2022 had an almost immediate response, as many other central banks raised rates to fight inflation
• Persistent selling by foreign institutional investors (FIIs) is also a concern that is a result of aggressive central bank policies following a possible global economic slowdown
• Indian Retail Investors (like us) who have been investing in markets over the past 24 months are now pulling out monies with inflation inching up and revenge spend thriving

How does this affect our portfolio? Should you be worried?

• As you may have noticed, the rollback in liquidity by central bankers has already spiked volatility in Indian markets due to panic reaction caused by heavy sell-offs which is termed as Taper risk
• Anticipating this very roll-back, on average we have about 60–80% of your portfolio in Debt and liquid to take advantage of the incoming fall. Rest assured we are watching your portfolio closely
• An analysis done by CRISIL in September showed that India’s macro indicators were average, and it ranked first in the ratio of government debt to GDP. Fiscally we are stronger than most emerging economies

How are we taking care of this?

• Taper risk can also be an advantage to long-term investors like us. Our strategy is to work with the J-curve to gain long term appreciation in our portfolio, and we continue to allocate along the curve. (See illustration below)

• We are also fundamentally well-placed to benefit from the Top India Inc increasing earnings as well as global technology and consumption spreads
• So, while we may not witness significant returns in the portfolio over the next 18–24 months, we are allocating to a high-quality portfolio where patience will have us win over the next 4–5 years