What investors can learn from a difficult year to improve Samvat 2079


Kalpen Park: Markets fluctuate, having said that, since I need to articulate a bit more to sound smarter I feel like you know, interest rates and maybe I have this very simplistic framework, which doesn’t work not 25% of the time but worked for me 75% of the time. He’s not too smart, but the framework is this: in India, interest rates fluctuate between 6% and 9% in long-term 10-year bond yields. Currently, we are in the middle at 7.5%. So, you know, we’re closer to the long-term averages.

But you know, there’s tailwinds, because of the currency, because of the deficits, because of, you know, policymakers who want to invest in global uncertainty, rates are going to start drifting higher, they’ve already increased considerably, but they will continue this drift for a little longer and it will make fixed income securities more attractive.

So a year ago when you parked money in fixed income not being in stocks, for example, you know, we got 3% and 4% returns. But today these portfolios are closer to 7-7.5%, closer to 7.75% too. So parking is now more cash-friendly, although rates may drift a bit higher, but fixed income becomes, you know, reasonably significant after a two- or three-year period.

On the other hand, while you know that stock valuations are still on the rise, I also know that we are currently in this cycle where valuation debates no longer matter, something else account. Last time taught us that gravity eventually returns and common sense rules return. So, you know, fortunately there are many large corporate sectors that have corrected sharply over the last six to nine months, you know, debt stocks are down, healthcare stocks are down, banking stocks from the last three or four years are gone. The credit cycle has just started to recover. So a little bit stocks are also in the middle and so, I think, you know, some of that market foam from both asset classes has moved.

Global equities have also moved a lot, whether you look at global tech companies or Europe and Asia have been completely decimated. We don’t talk about emerging markets anymore, 10 years ago they were like the shining star and BRICS was a popular word. Today, nobody talks about it. So now there are pockets emerging for us to start calibrating risk and I think there are more opportunities now than a year ago.


About Author

Comments are closed.