Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful”. Current market is an absolute reminder of the above quote.
Sensex & Nifty have touched record highs and still going strong. Globally, mobility and economic indicators are showing a recovery. Strong growth, loose policy, and excess liquidity are boosting global equity markets to all-time highs. India has also crossed the milestone of $3 trillion market capitalization. Due to the impact of Covid in the April-June quarter, India’s FY22 real GDP growth estimates are being downgraded by 2.0%-2.5%. However, the 2nd Covid wave has peaked out (more or less) and the pace of vaccinations is rising with improved supply. So, India’s economic recovery should come back on track by FY23.
FIIs have been net sellers in June but expected to come back strongly in 2nd half of this year. Till then strong domestic flows and increased retail participation should support markets. Any correction should be temporary and minor. However, short-term upside may be limited, and the market are likely to remain range-bound.
Strong numbers from Large Cap Stocks have justified their valuations and hence their allocations have been increased this month. Mid-Caps have also been catching up fast. Small Caps are in high-risk zone and hence allocations for that segment is not recommended at present.
Since RBI will not further decrease rates and inflation is expected to rise, most likely the interest rates may go up in the future. Hence Debt funds may also need allocation change, from PSU & Banking to Floater or low duration funds.
Considering current & future scenarios, equity to debt portfolio allocation needs further restructuring and should be in sync with the changing market dynamics. It is advised to be in touch with your advisors towards same. Happy Investing!
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