What investors should keep in mind in see-saw market swings

If on the one hand global inflationary concerns and continuing rise in interest rates are playing on the minds of investors, there are positives around the uptick in domestic economic activity. Investors need to understand that while in the near term the stock markets may be vulnerable to sharp corrections on account of global news flows around inflation and interest rates and geopolitical developments, in the long term, economic fundamentals will play out in the equity markets.

Two reports released by leading rating agencies Crisil and Moody’s Investor Service on Wednesday and Thursday reflected this concern and optimism. The Crisil report said that while the economic recovery faces multiple risks, “there is a silver lining as well. Recent RBI surveys indicate improving consumer sentiments which bode well for consumption demand and the first quarter GDP print does corroborate that.” The Moody’s Investor Service report also pointed towards strong momentum in the Indian economy. But it said inflation remains a challenge.

If the markets are witnessing pulls from both ends, investors must consider where it is headed in the long term. And if one goes by the broader consensus on the Indian economy and markets, it is positive in the long term.

This means one needs to follow the basics of equity investing—invest only the money that can be parked for the long term, avoid investing for short-term gains, and follow a staggered investment approach. Investors should go with fundamentally strong companies.