Be fearful when others are greedy and be greedy when other are fearful.
Warren Buffett

Between Oct 2021 and June 2022 India witnessed a sell off worth INR 2.19 lakh crore by FPIs resulting into volatility in the equity markets. This happened because of multiple factors.

As global economies started recovering post Covid, consumption started to pick up. As a result there was a gradual rise in prices of commodities. In addition to that, the war between Russia-Ukraine further led to rise in global commodity prices. For example, Brent crude oil saw its prices rise by 23% from Feb 22 to June 22.

The geopolitical tensions caused by Russia-Ukraine war, the sanctions and then retaliatory actions intensified the disruption in global supply chain. This led to volatility in global commodities and financial markets across globe. With demand further rising as a result of recovery from the pandemic and supply becoming constraint, inflation has been rising globally.

Due to these factors, globally central banks have been normalizing policies and raising policy rates to control inflation. Rising rates and monetary tightening are a key reason behind the sharp sell off from the emerging markets.

In the past also we have seen sell off triggered by FPIs but interestingly, the end of the outflow marked the comeback of the index, delivering competitive returns in the following years.

Conclusion –

Currently, other than FPI outflows, there are challenges like accelerated monetary tightening, sharp increase in US yields, rising inflation, adverse impact of Russia-Ukraine conflict on the growth, elevated commodity prices and slowdown in China.

But as we observed in the table above, Nifty has delivered competitive returns in the coming period post a sizable FPI outflow. Hence, once economies start stabilizing from inflation, rising interest rates etc, we could see equity markets rising back gradually. And we believe Indian equities will continue to remain positive on the back of factors like positive domestic growth outlook, steady corporate profitability, growth oriented policies, increasing DII participation and various others.

After almost 2 years of strong rally in the markets, we suggest you to consider the current fall as an opportunity and invest lump sum amount over the next six months. Remember what Warren Buffet once said “Be fearful when others are greedy and be greedy when other are fearful.

If all this is too confusing, then give us an opportunity to help you optimize your portfolio.

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About Us: Malpani Investments specializes in Investment Advisory and Planning. Our Mission is to provide financial freedom to our clients by understanding their financial goals and helping them plan, save, invest and be disciplined, so that they can stop worrying about money and lead a happy and healthy life.  We help them understand personal finance in order to eliminate the gap between where they are now financially and where they want to be. Helping them with a suitable investment decision so that they can give more time to their family, health and life aspirations. [email protected] / +91-7738637572