Start Increasing Exposure To Equity

Given that the equity market valuation looks richer, the confidence in asset class that has bought so much joy for investors over the past couple of years is bound to increase after a lengthy correction seen since October 2021. Yogesh Supekar discusses the market outlook while also highlighting the equity market’s performance in recent years

- Yogesh Supekar

In spite of the recent recovery in the BSE Sensex, the key benchmark index that we all love to track is still down by more than 10 per cent since the beginning of the year. While those who prefer to invest aggressively and have gone overboard on small caps, the pain is a little more than what the BSE Sensex suggests. The BSE Small-Cap index is down by ~17 per cent in 2022 so far. The question most investors are facing right now is whether we have seen the bottom or is there more anguish left in the system? Also, investors are wondering if we will see an all-time high in 2022 itself. In other words, will there be a steady or let’s say a V-shaped recovery in the equity markets? While all the above-mentioned questions are most relevant and it is easy to understand the anxiety faced by investors in such volatile times, unfortunately, the answers to these straightforward questions are pretty complex, to say the least.

Understanding the Current Situation

The reason why there has been a sell-off in 2022 is known to all. While recessionary fears have been doing the rounds in investing circles, the real villain has been inflation. The rise of inflation has been so sharp that the impact has been felt across the globe, leading to banning exports and policy changes and occasionally cancellation of supply contracts. All this is to secure supplies domestically and to control the rising inflation levels in respective countries. The western world (Europe) has never seen such a high level of inflation and uncertainties in commodity prices at least when there has been no tragic conflict in Europe.