It is the perfect storm of bad investing time in India.
While equity markets have been volatile after hitting a high at 38000 (Sensex), the debt markets have been even more volatile due to rising interest rates on the back of rising crude prices and USD rates.
On the equity market front, while the Sensex has moved swiftly in the last few months from 35k to 38K, it has largely been fuelled by only a few stocks and the broader equity market has been subdued. In fact, the Midcap & Small Cap space has seen massive corrections anywhere from 10% – 40% so far. The corrections in Equity moneys are universal across the emerging markets due to reallocation of investments by the global fund managers. More so in India the volatility is likely to move up as well given that we have an election coming up in summer of 2019. All this portends to a subdued, even a volatile stock market, prone to wild swings. Our advice to investors is to stay invested and look for enhancing investments at corrections to ensure that one benefits from market opportunities like mispricing.
On the debt front, the rising interest rates and adverse currency has pushed yields on debt investments to highs. This has resulted in existing Debt investments showing poor returns due to the mark to market impact of depreciation of bond prices.
We believe investors entering into debt now will benefit when the run down happens in interest rates about a year or so down the line.
So, come to think of it, bad times are in fact the best times for investing.