InvestorQ : What are the cues that I need to follow when reallocating in the current scenario?
Mary Joseph made post

What are the cues that I need to follow when reallocating in the current scenario?

Answer
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ishika Banerjee answered.
2 years ago


The Indian market throws up a plethora of challenges. Firstly, markets are at a trailing valuation of 26.5 times. That is way above historic averages. At the same time, valuations and volatility are below historic peaks we saw in 2000, 2008 and 2010. Also, retail euphoria is still missing. In relative terms, India still looks like a better growth story compared to other emerging market peers. So how does it define strategy?

One of the obvious outcomes of a scenario of rising interest rates, rising inflation, rising deficit and flat growth may be that equities may face pressure at higher levels as caution may creep in. The focus will therefore be on defensive and low beta stocks and more on a mix of defensives and long term growth stories. While mid-cap may still add value to the portfolio, they should be kept at a bare minimum. Remember, too much liquidity causes equity asset inflation and normally it is only the large caps that benefit.