A lot of your success with money is about awareness. You need to know the right direction to give your money. The awareness is possible only if you invest in knowledge. It may sound like a sermon from a sage.
However, knowing is everything in the world of personal finance. You need to know about the opportunity that comes to you. Your future depends on the way you utilise that opportunity.
Share prices in India are soaring. That is because of substantial domestic and foreign money in Indian equity assets . The net monthly flows in January 2024 into equity or equity linked mutual funds topped Rs 21,000 crore.
You are creating an impactful investment already if you are an equity mutual fund investor. There is solid support for Indian equities in the form of this money in a downturn. The fine print reading you must do is that share prices in India may not fall sharply due to the cushion of your re gular investing.
The other issue is the weakness in the Chinese market. There are visible signs of an economic slowdown in China. Prominent global fund managers have recommended pulling out money from China and investing in markets like India. That has prompted many large global investors to allocate more money to Indian equity assets than the Chinese. Since share prices are at a record high, the money will likely come to India over the next several months.
The value of the rupee is also likely to get a boost. India’s government bonds will likely be included in international benchmark bond indices. That is likely to increase the flow of foreign money into India. The year ahead is likely to be eventful for the rupee.
There are more tailwinds than headwinds, as a result of which the rupee is likely to remain steady or inch up against major currencies in the world.That makes India an attractive destination for foreign investors. India is already the largest recipient of remittances from non-resident Indians globally.
If you are a regular investor in the stock market and directly buy or sell shares, you are probably waiting and watching for that correction. Considering the strong inflows into Indian equities from local and foreign investors, a sharp correction is unlikely.
Choosing it right
The big picture in India favours robust economic growth over the next several years. That is irrespective of the government in power. Investment advisors advise playing the economy and identifying companies that would ride on robust growth. However, when you look to buy these companies, valuations are already sky-high. That meansmarket price multiples are way too high than fundamentals for comfort. You are supposed to enter your investment in priceearnings multiples that are lower than they are today. However, it is worthwhile to keep an eye on the fine print.
Most listed companies have earnings calls after quarterly results. You can sense the mood at the corporate management level through those conversations. The transcripts are online for you to read if you do not have the temperament to listen to the audio version. If you search for keywords like ‘outlook’, ‘growth’, ‘inflation’, ‘pricing’ or ‘guidance’, you will find valuable comments from company management.
For example, despite a sharp rally in hotel company shares over the past year, there is a lot of confidence exuded by management in the sector. The growth outlook is robust for these companies as most of us are choosing to travel within the country. Indian Hotels, the
top hotel company that manages Taj and Ginger properties in India and abroad, has projected a double-digit revenue growth. Companies in the sector use profits to reduce debt and run an efficient operation. That is possible only if people travel more within the country or come to India from overseas. Even if you cannot travel on holiday in the year ahead, investing in the sector could see you have enough money to pay for your next holiday.