Hello Readers! 

The day before today that is on 1^st February 2020, the Union Budget for the fiscal year 2021-22 got announced by the Finance Minister Smt. Nirmala Sitharaman. The budget was completely growth-oriented as per many scholars, and this was clear after the Equity showed up a rally of nearly 5% in its benchmark indices that too on a single day, on Monday, 1st February.

At a time when investors were expecting the pullback in 2020 rally might get deeper, suddenly after the budget announced the direction of the market changed with a decisive footing.

Those investors who were sitting outside the market and waiting for a big correction might be going through a sense of regret. This sharp upward trend of the market that too on a single day again reestablish the fact timing the market is always useless, what always rocks in the case of investments is, focus on asset allocation.

Is It Too Late To Invest In Equity? 

The sudden rally in the Equity market just happened, people who missed the change to benefit from it are now in the stage of dilemma, whether they should wait for another pullback to invest more or whether they should invest all their surplus in one go.

Well, how much one should invest is completely subjected to individual situations and risk tolerance, however, if they hadn’t deviated from their original asset allocation, the answer would simply be, continue investing as you are.

The budget announced is concentrated prominently on pushing economic growth through a spending drive, the expectation is that both corporate and individual earnings will get a boost. This rise the expectation of investment-led growth, subsequently this investment growth can accelerate consumption-led contribution to growth.

This all scenario clarifies that earnings from the corporate sector of India will get recalibrated and eventually this will show up in equity market returns. If the budget works out the same as it is planned, then expectations for GDP growth in FY22 will push up equity market returns higher than earlier expected for 2021 too.

Which Class Of Asset To Choose? 

Well, this is the most important aspect to look upon and too important at a time of a low-interest rate regime. Globally, interest rates are at their lowest in many years. In India, the repo rate is trending at 4% per annum, which is currently lower than the long-term yield on government securities.

This genuinely indicates that investing in fixed income interest bonds currently is of no use. So, what is good for right now? Corporates will continue to benefit from lower interest expense, which in turn benefits profitability for equity shareholders. So basically, investing in Equity class assets is an option that must be followed.

Fixed-income returns will continue to remain low, and a consumption boost can fuel inflation. And investing in low fixed income interest in a scenario of rising inflation simply means that inflation will eat up all your low returns. For long term wealth creation and growth of your portfolio, equity investments are likely to be the most efficient way out. Planning for long-term wealth creation and parting yourself away from the Equity asset class that too in the current economic environment is not worthy. So what would I advise is, if you don’t have asset allocation in Equity asset then, don’t waste your time in waiting, do it now!

The Indian Economy is all set to grow and for sure it will boost the returns from the stock market and mutual funds, in the coming time. To be a part of the future gain from the economy, be a market participant today! Start Investing Today! 

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).