It is almost the end of the calendar year. You can reflect on the year gone by and the wisdom that emerges from your money experiences. Your money saw a roller coaster ride if you are an investor in the stock market. Prices have barely increased if you go by the performance of the benchmark indices like the NSE Nifty or the S&P BSE Sensex. However, there are fierce arguments in favour and against the state of share prices. Foreign portfolio investors are pulling out of markets, trading a relatively higher valuation than the rest of the world. Indian shares continue to attract new foreign investors, but many old investors have pulled out money.
Despite that, Indian markets held steady. Domestic institutional investors like MFs are now the bedrock that protects volatility in Indian equities. The monthly systematic investment plans are crucial in adding stability to share prices in India. There was a time when benchmark indices used to swing based on the activity of FPIs. The year has put an end to that. Despite billions of dollars of net FPI outflow, Indian shares trade at a record high.
The economy
If you look at the monthly updates from the Reserve Bank of India through the year, the big picture story remains of resilience in India. Despite significant disruptions due to conflicts in Europe and the Middle East, that is.
The RBI has acted in tandem with the government to maintain price stability. The observations of the RBI do point out two areas that are witnessing a slow recovery. The first one is the rural economy. Consumption in the rural sector is a significant contributor to productivity. However, rural markets have yet to recover from the COVID-19 setback and erratic rains. The small and medium enterprises sector is the other important segment witnessing slow recovery.
While large companies that are market leaders seem to be doing well in business growth and profits, smaller businesses have yet to return to pre-COVID-19 level growth. That is not helping generate employment at the grassroots level. The government must do the heavy lifting through capital expenditure on infrastructure. That has managed to keep the large-scale infrastructure businesses going. They are hiring more workers in urban and rural areas.
Sebi actions
The Securities and Exchange Board of India, the stock market regulator, has taken significant steps in investor protection. The decisive action against those advising without adequate licencing will help organise the investment advisory industry. While we journalists write about events and their broader impact on your money, financial advisors are supposed to advise you on financial planning and asset allocation. From your standpoint, you need to pay attention to both.
You need information and a basic level of understanding about personal finance. At the same time, you need specific professional advice to make appropriate asset allocations to secure your financial future. Sebi chairperson Madhabi Puri Buch warned against speculative activity in futures and options without understanding. There are very few traders who benefit from speculation without owning underlying assets. The regulator is emphasising the need for caution.
What 2023 means to you
For your money, the year has been a mixed bag. Presently, it appears you are interested in IPOs. Over R2.3 lakh is blocked in applications. That means less money available for secondary market investing. There is hope that 2023 will bring back the mojo in IPO investing.
As an individual, you can try for quality companies in the IPO round, but if you are not into finance, you are better off investing in index funds. The year teaches us that India is an island of stability for now, and there is an opportunity to ride on the potential growth ahead. A regular, disciplined approach to investing can help you create the long-term wealth needed to beat inflation and for goals like retirement. Investing and trading without knowledge is like shooting in the dark. You may hit the wrong targets or run out of bullets.