Where To Invest Now?

The current stock market levels are synonymous with the old adage— many investors burn their fingers by investing when the markets are at an all time high. The S&P BSE Sensex has gained about 18 per cent in the first half of the year and is expected to go up a lot higher. However, the noise around the index levels being at an all time high is purely based on absolute figures. Let us understand this with an example—just the way ₹10,000 today will not have the same purchasing power ten years hence (it did not have the same purchasing power ten years ago), the constant mention to indices hitting all-time highs is an incorrect expression of gauging the real worth of the markets.

- Narayan Krishnamurthy, Preeti Kulkarni & Himali Patel

Smart investors, who have tracked the past, are not highly perturbed by the rising markets. Going by the average inflow of ₹4,000 crore a month into equity SIPs, there is no holding back investors from participating in this market rally. “I don’t see any risk at these levels and feel my investments are safe enough,” says Mumbai-based Minu Pandit. A doctor, she is pretty certain about her investments as she has predominantly invested in equities through mutual funds. “It is easy and convenient to invest through mutual funds than directly invest in stocks,” she explains.

She is not alone. Scores of investors in recent years have benefited from the wave of systematic investment plans (SIP) of mutual funds, which have changed the way in which small investors are participating in the stock markets. Regulatory changes and the reducing gains from investments in physical assets have made people view investments in stock markets through equities as an option that they just cannot ignore anymore.

Rising tide

In spite of the perceived impact of demonetisation, the macro indicators do look favourable for the overall health of the economy. The government is working on several developmental projects which are showing results in some sectors, even as others are turning around. The RBI is obsessively working towards checking inflation and there is surplus liquidity in the market, which is visible in the manner in which market participants are demonstrating their conviction in India’s growth story, which in turn is visible in the performance of the equity markets.