The impact of Omicron on the economy is not yet visible as it is still in its infancy. However, based on GST collection and pent-up sales demand across all sectors over the past 18 months, the impact on the economy is likely to remain moderate.
Factors to watch
A hike may not be ruled out at some point that could come in the second half if inflation remains untamed. Global inflation and the fact that the US Federal Reserve is about to raise interest rates after a long time will also affect the flow of money in and out of stock markets around the globe, including India.
Stock valuations are even higher in certain pockets of the market. Quarterly corporate earnings will remain an important factor for stock prices to rise or adjust to the new reality. A correction is possible but such a drop in the market cannot be ruled out.
Remember that the more you save during a bear market will determine how much you will accumulate in the long run.
India’s long-term growth story remains intact and so any dip or drop can be used as an opportunity to add quality stocks or equity funds to the portfolio investment.
Areas to watch could be hospitality, entertainment as the opening theme takes center stage once the pandemic is over. Banking, technology, infrastructure could be other areas to consider.
What to do
When the NAV falls due to market volatility, they can add new funds to the same sum to accumulate more over the long term. New equity mutual fund investors also don’t need to try to time the market. One-time buyers can use STP or raise their funds in the intermittent market depending on their risk profile.
Choose five to seven constant-income mutual funds that are diversified by market capitalization and sector. Long-term equity mutual funds can continue to invest and stick with large- and mid-cap funds.
Small-cap funds can be taken by those with a high-risk profile because of the high risk/reward ratio. Some may be invested in them, especially topical or sector-specific funds such as pharmaceutical funds and IT funds.
Avoid duplicating mutual fund systems and implement an asset allocation plan that is consistent with debt and gold and equities. In the current scenario, in the debt fund portfolio, a floating bond fund can be selected if the investment objective has at least three years remaining. Gold has been mostly stable over the last 1 and 10 years, but by keeping inflation rising in context, you can get a 510% share of their portfolio.
Conclusion
Moving on to 2022 for the stock market, unlike the 20plus returns we saw in 2021, this year’s returns are likely to remain moderate. However, stock investors can certainly expect a positive end to 2022, although continued volatility cannot be ruled out.
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