2022: A YEAR OF ACTIVE MANAGEMENT

Over the last decade, we have witnessed easy liquidity conditions and rate cuts by global central banks which in general created a conducive environment for equity markets to perform.

- Mr. S Naren

More specifically, over the last one year, owing to the abundant liquidity released by global economies to tackle pandemic-led growth challenges, most of the emerging and advanced economies today are increasingly witnessing a shift from deflation to reflation. In a bid to tame rising inflation resulting from ample liquidity, Global Central Banks and Governments have hinted towards a gradual withdrawal of excess liquidity from markets, a move which is likely to impact global markets including India. In this setting, when we look at the Indian markets from a Valuations, Cycle, Triggers and Sentiment (VCTS) framework, India appears to be on a strong footing.

Deflation to Reflation

Plunging global liquidity

Valuations: Valuations across asset classes remain elevated when compared to their respective long-term averages. Historically, whenever any asset class is fully valued they tend to become volatile. Our Equity Valuation Index highlights that valuations are not cheap and recommends equity investing only with a long-term perspective while strictly adhering to asset allocation framework.