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Explanation: rising market. Does a short-term investment pay off?

The BSE Sensex rose 1,041 points, or 1.87%, to close at a nearly three-month high of 56,857 on Thursday. The Sensex has recovered over 6.3% over the past 10 trading sessions and over 11.5% over the past six weeks.

It hit a 14-month low of 50,921 on June 17. Experts say this has boosted overall investor confidence. However, with inflation, geopolitical risks and fears of recession among the risks, including interest rate hikes by central banks (including the US), stock markets could continue to be volatile. short-term, and investors shouldn’t be too quick and short-term, experts say.

Why is it high?

Thursday’s 1,000-point increase came even as the US Federal Reserve on Wednesday announced a 75 basis point hike in interest rates. The markets have understood this and were expected to rise by 100 basis points a week ago.

Indian markets have performed well over the past month as oil prices fell on recession fears in the United States and lower growth expectations in China. October 2021 and June 2022 (monthly average of Rs 28,431 crore) – Outflows by foreign investors in Indian equity portfolio – Rs 2.55 lakh crore – July Rs. 1,462 crore. It ensures market stability.

Meanwhile, according to a Credit Suisse report, developed market stocks fell on fears of an emerging market recession. We are less concerned about India’s macro fundamentals than global interventions.

Nonetheless, our medium-term outlook for Indian equities remains positive and any sharp correction would be a good buying opportunity. Another factor is the improving inflation outlook and expected rate hikes.

How does the Indian market compare to other markets?

Over the past six weeks, the Sensex has been one of the best performers among the world’s major indices with a return of 10.5%. The Dow Jones Industrial Average in the United States and the Nikkei 225 in Japan follow closely, with returns of 7.7% and 7.1% respectively. In fact, the Shanghai Composite in China and the Hang Seng in Hong Kong produced negative returns of –1% and –2.1% respectively.

From a sector perspective, the capital goods, consumer staples, consumer staples, banking and auto indices have risen 14% to 17% on BSE over the past six months. weeks, while indexes such as IT, healthcare, metals and oil & gas saw declines. growth between 6.

What should you expect?

Brent crude fell below $100 a barrel last week, from above $110 a month ago. This has been a huge relief for the Indian economy, which depends on imports for its energy needs.

With Brent currently trading at $103 a barrel, experts believe that despite geopolitical risks, a slowdown in the United States and slower growth in China could keep oil prices in check.

Lower crude oil prices on the international market will reduce inflationary expectations. But all the worries are not gone. A sharp rise in interest rates following the Reserve Bank of India’s rate hike poses a threat to demand in the economy, but could dampen corporate earnings growth in the next two quarters.

As the markets are volatile, experts believe that investors should not enter the market to take advantage of the current high. “There are many factors at play in the markets right now and the markets can go either way depending on what factor is at play.

As this is not a market for short-term gains, one should only enter the market with a minimum time horizon of three years,” said the CEO of a mutual fund.
“In a context of central bank tightening, geopolitical risks and fears of recession are the main risks that could soon lead to increased volatility.

Against this backdrop, India’s valuation premium is still inflated, hence the need for caution and risk management. Thus, we remain on the defensive and prefer companies with greater domestic exposure,” the Credit Suisse report said.

He said: “Our favorite sectors include financials, healthcare, automotive and consumer packaged goods. “Beyond the short term, we see many structurally favorable investment opportunities in sectors such as labor, entertainment, chemicals, real estate and defense,” the statement said.

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