The new financial year 2022-23 is here, but what does it mean for short-term and long-term retail investors?
Since the outbreak of the Covid-19 epidemic, Indian stock markets have seen a spectacular influx of new investors enticed by the market rally and looking to book profits from the year-and-a-half-long bull market. Having said so, since 2022, the global and domestic macro scenario has changed tremendously.
Anshul Gupta, Co-founder of Wint Wealth, says, “Rising inflation, the anticipation of higher interest rates, geopolitical issues between Ukraine and Russia, oil price shocks, etc., have led to indecisive market behaviour and an uptick in volatility. This has raised apprehensions among investors leading to profit booking in markets and a close watch on the upcoming events.”
Hence, retail investors are searching for avenues that offer higher returns to beat inflation and security in these uncertain times.
Short Term Outlook
The short term is grappled with unpredictability. In a changing interest rate scenario, returns of debt mutual funds with long-term maturity can be adversely impacted.
Gupta suggests, “Investors can resort to fixed-income securities with shorter tenure. Individual bonds can help earn modest returns and combat volatility. These bonds, when held till maturity, are less prone to fluctuations.”
Long Term Outlook
In the longer term, experts say markets eventually factor in all the probabilities. “Long-term investors can take advantage of the current volatility and invest in equities. It is essential to invest in companies with sound financials rather than chase behind penny stocks that could turn into multi-baggers,” explains Gupta.
Note that, according to industry experts, a well-diversified portfolio across various asset classes can help beat inflation and achieve financial goals. An experienced financial advisor can help build your portfolio based on your risk-return profile.
Gupta points out, “Foreign fund flows backed the previous bull runs in Indian stock markets. However, the recent data suggests that fund flows are dominated by Domestic Institutional Investors (DII) and Retail Investors (RI).” Since January 2022, Foreign Portfolio Investors (FPIs) have sold close to 1.5 Lakh crore worth of Indian equity.
On the other hand, he adds, “DIIs have invested over 1 Lakh crore in equity markets. AMFI data suggest retail participation is at an all-time high with over five crore SIP accounts. This reflects sheer confidence among long-term investors.”