4 Oct 2022
The month of September 2022 has been volatile for Indian equities with the Nifty 50 and Sensex ending 3-4% lower for the month*.
The Indian rupee also weakened against the dollar in September, hitting an all-time low.
And while there could be some risk sentiment in the near term, there are four things that could emerge as a positive for India in the medium term, said Harish Krishnan, fund manager for equities at Kotak Mahindra Mutual Fund, while discussing the outlook for October.
- Correction in commodity prices: Given that India is a large importer, the fall in prices of commodities, especially that of energy, could be beneficial for India.
- Manufacturing in India: The energy crisis in Europe could lead to European companies becoming unviable for manufacturing globally. Can some of this manufacturing come to India? Indian manufacturing companies are currently in good shape, having reduced their debt and investing in higher capacities.
- Prospects of higher offshoring for Indian companies: The US is short of manpower currently, and this could lead to higher offshoring for Indian companies.
- Domestic Reforms: A series of reforms taken in the country over the last few years could be beneficial for it.
While equities have seen some correction, it has still been an outperformer compared to other global markets, and valuations are still slightly above the 10-year long-term average.
India could also be impacted by the higher cost of capital globally. However, these risks are transient, and unlikely to impact in the long term.
Harish advises that investors must continue to be disciplined with asset allocation and focus on long-term goals. If valuations see a significant correction, he advises investors to raise their allocation to equities in a systematic and disciplined manner.
Time in the market is more important than timing the market, Krishnan said.
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