Expert's Take on Market
Due to the spectacular run witnessed over the last 2 years, equity markets had, earlier this year, moved to a fairly valued zone as a result of which allocation to equities in investor portfolios were closer to their strategic allocation limits. For the last 12 months, we have been cautious on equities as an asset class given the expensive valuations, Anupama Sharma, Executive Director at IIFL Wealth said.
However, markets have corrected since the beginning of the year due to the war in Ukraine, concerns over the Omicron impacting growth recovery, and the higher inflation and interest rates dampening investor sentiment. Further, these upheavals have impacted ground level growth as well with recent data indicating that India’s economic growth slowed down to 4.1% in the fourth quarter of FY22 and estimates for full year GDP growth in FY22 getting pruned down to 8.7% from 8.9% estimated in February.
Markets have corrected over the last 6 months and participants are now quickly discounting the impact of high inflation and the rising interest rate scenario. We believe that markets are likely to continue witnessing volatility. In the backdrop of such a landscape, investors should maintain asset allocation disciplines and take advantage of the volatility by building equity positions at compelling valuations, she said.