Dr. Sanjiv Agarwal
Economic slow down is ruling the world today, including India. While slow down brings with it retardation in economic growth, lower investments, increase in prices, lesser demand & production and reduced employment opportunities, the current slow down comes with tagged inflation which is persistent and long over due for correction), weakened rupee as against dollar with 10% impact in last one month alone negligible fresh investment in core sectors, enhanced tax rates and interest rates etc. Added to this is the lull in capital market with no activity in primary market and a not so buoyant stock market, though the market saw a rise in last few trading sessions.
Recent indications reveal that rates on fixed deposits may also come down as one of the major public sector bank has just slashed the deposit rates. This may be followed by others. When the markets are down or not performing well, even mutual funds returns have been adversely impacted.
In fact, funds available for investments with investors have also depleted, given the reduced purchasing power of money and mounting inflation, abnormally high fuel prices etc. The slow down has also impacted business or corporate increments. But all this does not mean that the investors should not save or rather stop investing.
When it comes to investing now, one needs to be very cautious as all investments may to not be good investment in present scenario. It is always desirable to hold on to some bullion in the portfolio but looking to the present trend, one can hold to make any fresh investments. Obviously, this is not the time to sell gold or silver. However, both the metals may be picked up on successive falls for retaining them as a long term investment asset.
Interest rates have just started falling and one can make quick investments in bank deposits, debt funds or fixed income securities as any delay may yield a lower return. During these days, when making a saving itself is difficult, owing to increase on food cost, fuel cost, grocery bill etc., investment in right instrument becomes more crucial for future. In such a scenario, investing in equities should be resorted to only if one can afford it in terms of investible surplus and he has a reasonable knowledge of the stock market and ability to analyze the company he wants to invest in. Otherwise better be avoided.
With direction less economy and shaky growth projections, one needs to resort to short to medium term investments, preferably in debt funds yielding 9.5 – 9.90 percent return or income funds yielding 9.5. -9.7% or bank deposit which could yield 8.50% to 9.25% percent presently. Corporate bonds could also be preferred based on risk – return matrix after analyzing the rating of the company.