Equity, Gold have Medium to long-term growth potential;
Start at least now to invest in Equity markets- MF SIP the best bet
‘Equity shares and glittering Gold have medium to long-term potential; so using liquid funds to navigate debt volatility would be a wise move.
Companies’ operating profit have been moving up sharply and is at the highest levels since past 6-7 years. Net sales are also moving up to the highest levels and also the operating margin.
Why are equity markets moving sharply? Is it only liquidity, or is it a bubble? . “The reality is that the economic activity in some sectors is similar or higher than pre-Covid levels. Companies’ operating profit have been moving up sharply and is at the highest levels since past 6-7 years. Net sales are also moving up to the highest levels and also the operating margin and profit have been moving up sharply and is at the highest levels since past 6-7 years. Net sales are also moving up to the highest levels and also the operating margins.
The driver of this earning growth is that there is a pent-up demand, lower interest rates and finally, companies have done very well in their cost control measures. Companies have done a good job in operating in the newer environment, by adopting technology and thus their profitability is higher than pre-Covid levels. This is getting reflected in the stock markets..
Analysts said that on delving deeper, we understand that the concentration of economic power is moving towards large-listed companies. Hence the large is getting larger and the small is getting crushed. Real estate revival is happening & it has a lot of multiplier effect in the economy.”
There is a lot of potential in the long term. Stocks are focused towards economic recovery and at the same time have the ability to survive the downturn, Some stocks are positioned to benefit from further recovery in the rural markets.
It seems we are at an inflection point in the long term interest rate cycle. “Inflation has been running higher than the RBI threshold of 6% and the government is borrowing a lot more than what the bond market could absorb. As the economy is recovering at a steady pace, the RBI may take back some of the crisis time easing measures in coming quarters. All this will put upward pressure on the bond yields. So the interest . rate is poised to move higher over the next 2-3 years.
There is scope for short-term yields to move up in the near future, and it is good for short-term investors as we get higher rollover yields. The 3-month yield is currently 3.5%, and 5 years is closer to 6%. If investors are looking to enhance their yields, there is some opportunity. But there is a market risk due to higher duration. The good news is that investors can overcome this risk by having longer time horizon.
So investors are advised to take the cues and start investing directly or through MF-SIP to harvest the potential of the stock markets in the years to come.
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