US Fed, RBI rate hikes wipe out Rs 12 lakh cr equity;  what should retailers do?

US Fed, RBI rate hikes wipe out Rs 12 lakh cr equity; what should retailers do? – Mail Bonus

NEW DELHI: The past week has left equity investors badly and beaten, as a series of central bank rate hikes around the world has well and truly heralded a new century of tighter financial conditions after the easy money days of the past two years.

As the Bank of India, the US Federal Reserve and the Bank of England raise interest rates in two days, national benchmarks have collapsed, with investors losing 11.8 million rupees to market value. companies listed on BSE.

It is no easy task to navigate the market turmoil, especially as foreign institutional investors have shown no signs of relinquishing their biggest sell-off in Indian equities since the 2008 global financial crisis.

“For long-term investors, the best advice would be to stick to their asset allocation plan and not cut the portfolio too much. International markets are undergoing these sharp adjustments and mature investors have learned to live through them, “said Abhay Agarwal, founder and CEO of Piper Serica to ETMarkets.

The fund manager of the SEBI listed asset management service provider tells investors not to increase their share capital in the portfolio by giving in to “bottom fishing” because current sales could continue for longer.

In the past week, the BSE group Sensex and Nifty50 lost 4 percent each.

Agarwal says that if one is under-allocated to equities, it would be a desirable policy to start distributing funds in stages in high-quality equities that have a very stable trading model.

“Domestic investors, who have bought the dip so far, could also get on their nerves if there is a significant correction. “It can be a situation, even in the short term, where investors prefer to get in cash rather than buy the dip,” he said.

Although resilient buying interest from domestic investors has dampened stock markets amid heavy sales of FIIs, Agarwal warned that if FII sales increase in the short term, domestic flows may not be sufficient.

Nifty has reported less than 10 percent despite a $ 23 billion sale of FIIs in the last seven months. This is in stark contrast to the 50 percent drop in the index that was witnessed in 2008 when foreign investors sold shares for $ 10 billion.

As the RBI is launching a round of interest rate hikes, indicating that it intends to suck out liquidity through increases in the required capital adequacy ratio, Agarwal warns against investing in highly indebted companies.

“… companies that are either heavily indebted or need a steady infusion of bank capital without being in the investment category will have a very difficult future.”

The portfolio manager also tells investors to avoid investing in what he refers to as “historical stocks” that have weak fundamentals.

Agarwal says that if investors have taken up such stocks in speculation, they should stop them immediately as these stocks, when the market loses its image, sink to the bottom.

“Also stay away from any companies that may have a great brand but are not clear on the path to profitability, especially upcoming IPOs,” said the fund manager.

Continued global change into a system of higher interest rates and the flow of international capital out of riskier emerging markets to the United States means a test period for markets, which are characterized by volatile markets, Agarwal said.

“Investors who understand that equity investing is just a form of managing savings will be able to easily overcome these fluctuations and will benefit from it by increasing their allocation wisely,” he said.

“Traders must be whipped. Before making a decision, it is best to get sensible professional advice and act accordingly. ”

(Disclaimer: The opinions, recommendations, opinions and opinions of the experts are their own. This does not represent the views of the Economic Times)

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