In terms of allocating Rs 10,00,000, we have to take into account the sectors that will do well in the immediate term, and those which will do well in the medium term and finally long term.
After a muted close to 2018 where both Sensex and Nifty gave a low single-digit returns, most investors kept their investments on hold and awaited clarity as to what the government will do in the Interim Budget in terms of policies, and monetary policy stance from the Reserve Bank of India.
Now, with both events out of the way, investors who have been waiting on the sidelines can look at investing their capital in either lump sum or in a staggered manner in equity markets.
The message from Interim Budget and Monetary Policy Committee (MPC) is very clear — the government is looking at growth and the sectors which are likely to benefit the most are financials, consumption, IT and energy.
The Interim-Budget 2019 was largely focused on improving the livelihood of the rural population through various social spending schemes and also of the middle-class population – which means more money in the hands of people.
Also, the downward revision of 60-80 bps to the MPC’s 1HFY20 inflation projections and the opening up of the output gap have reignited the possibility of multiple rate cuts going into 2019, suggest experts.
Global brokerage firms such as HSBC & Nomura see another rate cut by the central bank in April by 25 bps and possibly another 25 bps before December 2019.
Even though most analysts have warned that transmission of rates will be a key challenge but even the slightest cut in lending rates could see a major boost in consumption, consumer durable, auto etc.
The focus is now on the Lok Sabha elections. Being an election year, markets are likely to remain volatile which makes it the right time to invest. The big money can be made if you get the sectoral allocation right.
“Perceived risk in the markets and actual risk normally move inversely. Which essentially implies that when people think that it is very risky to invest or an asset class has not performed for some time the performing asset class tends to get all the attention and recommendations to invest. Actually, the contrarian investor makes more money,” Sandip Sabharwal, asksandipsabharwal.com told.
“The markets are in a mid-cycle correction in terms of the broader markets and this is not the end of the bull markets. The key is to buy the right kind of stocks and hold on to them to ride out the cycle. The interest rate cycle will not be very steep the way things are placed and big fears on very high rates due to an inflationary spiral are unlikely to play out,” he said.
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