The year immediately after the nice bounce-back carries with it a lot of expectations. Many times, it becomes a burden too. Over the past 12 months, even the mutual fund delivered near 40% return. Last year, Morgan Stanley reports predicted the BSE Sensex to be at 51k at the peak of December 2021. The index has far exceeded that expectation. If one invested in diversified equity thematic and sectoral funds, you will have possibly even doubled your money. Directly buying shares was even more rewarding to multiple. Stock prices of a few handful corporations have jumped multifold in a year.
That puts lots of pressure on the year ahead. Anyone investing regularly within the stock exchange would know that a repeat performance isn’t easy. Many expectations should be met for stock markets to generate a higher return over the following few years.
It is well known that today’s share price is the function of tomorrow’s profit. With share prices trading at record-high levels, the earnings for the heading two years are already within the current price. For times to come, the market will witness that businesses are likely to do even better in the years ahead cent percent and tracking would take at least two quarters to predict.
While there is a prediction of a real risk to financial markets is inflation due to high persistence. This further has an impact on the borrowings for expansion. For India, the post pandemic recovery is just about the beginning. The year to be welcomed is very vital for sustaining growth and expanding economies. Demand driven by private consumption is the most significant booster to the economic growth in India. The markets need people to earn well and spend money.
To sum up the state of the economy, it is bountifully clear that whether or not corporate gains stay on trial in the coming year, the demand driven by private consumption will continue to position deep in 2022. That means businesses may take their time for capacity expansion.
Inflation is the most vital risk concerned to money in 2022. A persistently high consumer price inflation would mean borrowing rates designed by RBI will be constant & will not shoot immediately. The US & Indian interest rates are directly proportional. However, the execution will affect the capital flows into equity and debt markets globally. When US interest rates go up, global institutional investors prefer assets denominated in the US dollar over any other currency.
Although India may be performing better in government finances, checking inflation, rapid disinvestment, foreign investors may go slow or pull out money. That might just end up to be a blessing in disguise for Indian investors who are looking to get going with their investment. If you have done it, work with your advisor as a team. Hire a financial planner, it is time to get going with the excitement of the market in the year ahead.