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Your current view of the Indian equity market
From the beginning we held the view that from January 2022 to March 2023, the 15-month period will be seen as a tale of two halves. The first half where we are right now will be volatile, not outright bearish, driven by three reasons-interest rate regime change which is happening across the globe, second is the spike in the inflation conditions that we have seen so far, and third the troublesome geo-politics in the form of war.
The good news is we are in the last one-two months of this time frame and changes are on the horizon. These are some of the industrial commodity prices that drove this inflation to come down like steel, copper, agri-based commodities, these are down somewhere between 10-25% over the last month or so. Also, the chip manufacturing which is in shortage is finally coming back into supply. We will see good supply in six months time. And finally with China opening up, the logistic cost which is the third rival behind higher inflation is also going down.
So, in the near term, inflation might be ebbing and given that sort of scenario the worry of equity markets whether in India or global about the rise in interest rates and particularly the pace of it, there is a good chance that it might slightly start to come down over the next couple of months. Hence, we feel that 75-80% of the bad news is in the price. And while we have been quite cautious from the beginning and advised to invest in tranches, STPs or SIPs, we feel now could be a good time to look at some lumpsum investments too.
Your outlook of the Indian economy in a three years time frame
In three years time, the Indian economy will emerge to be in good shape. There will be a private sector driven capex cycle, also in the last ten years real estate sector is bordering out, double-digit salary hikes come through across a multitude of sectors. So while near term consumption spending is through the flow, given the inflation and the oil related worries, in 9-12 months, consumption might also come back. Till 2024, government outlook will also be in growth mode given the general elections. So, putting money with a three years perspective will not be a bad idea.
Sectors you are positive on
We talked about private sector capex cycle, it will probably have a good rub-off on industrials so capital goods part of the Indian economy, we are also overweight on real estate and allied sectors in the context of portfolio and third given the domestic recovery we are positive on lending financials where we think it will benefit from cyclical uptick in the economy.
Advice for existing and new investors
It depends on the kind of portfolio one holds and one piece of advice cannot be for all, but given that the valuations are reasonable and bad news is kind of ebbing, this is not the bad time to put some incremental money to equities. However, I would advise new investors to try the equity market first in the form of an index fund or diversified fund rather than the one generating alpha.
Your view on the second half of this year
I am bullish starting from September this year to next 2-3 years. I think a better part of this year will go in investing rather than reaping benefits. I think if we invest now with a three year perspective, we will see the benefit then rather than in these five months.