The World Health Organisation deliberately avoided the Greek alphabets - Xi and Nu in naming the variants of Covid; well that’s unarticulated. Interestingly, the next Greek letter after Omicron is ‘Pi’. The famous Canadian author, Yan Martel’s words in ‘Life of Pi’ is very much relevant in current circumstances – “You must take life the way it comes at you and make the best of it.” The world has witnessed it, as humanity made the best of what came to it.
As the benchmark indices scaled to mount 60,000, active fund managers witnessed revitalization of Indian markets with the rally becoming more broad-based. In the primary market, Paytm IPO turned out to be a hot Potato on listing, nevertheless Zomato did delivered an apple pie on the D-Street. As we have seen Jan Dhan Yojana has been truly transformational for millions of Indians, the next leap could be Jan Nivesh Yojana.
The over dependence on super-optimized supply-chains and under-investment of a decade is clearly visible on the wrappers. As the pandemic kept us hostage at home, it also created shortages outside. We were left with little margin of safety - be it a ship getting stuck in the Suez or mining sites getting disrupted. From chips to ships, from drivers to miners, from crude to coal, from power to paper, from palm oil to metal coil, from wood to food, there were shortages abound. We had anticipated revenge consumption but not revenge margins by producers and retailers. The empty shelves and burdened queues reflect an increasingly de-globalized world. The time for Just-in-Time may be over for now.
I had highlighted some ‘R’s to watch out for in one of my earlier messages, viz - Geo-political Realignment, digitally Re-designed world, Global Reflation, Reforms, RBI’s resolute approach, Resurgence of corporate India, Return of Investment cycle, Revenge consumption, Real Estate recovery. To update, some of these factors have already begun to play out over the past few months.
We have witnessed revival of consumption in the economy led by pent-up demand and resumption in hiring activity, particularly in the information technology sector. The near-normal monsoon has supported sustenance of rural consumption. This entirely has reflected in GST numbers with November’21 collection at Rs 1.3 lakh crore, the second highest since the introduction of the tax in 2017.
The corporates have also reported strong recovery in earnings growth over the past few quarters. Some of the key drivers of this earnings growth has been global reflation, innovation and cost rationalisation, in addition to this low interest rate regime and low corporate tax rate has also augmented overall corporate profitability.
The ultra-loose monetary policies globally have played its part in stoking the flames of inflation including consumer and asset price increase. The central banks around the world will now have to accomplish the balancing act of contending inflation without slamming the brakes on economic growth.
One must note that loosening of monetary policies was indeed the need of the hour that catalysed the economic recovery across the world. Scrambled supply chains also played its part in sticky inflation, and this doesn’t come as a surprise in inter-linked world as one we live in today. In the meantime, the Reserve Bank of India is keeping a watchful eye on inflation.
Indian mutual fund industry has witnessed several milestones in the year gone by. The scaling of new peaks by equity markets and increase participation of investors have led industry AUM to a record high of Rs 37.34 lakh crore in November 2021.
Investors are more and more becoming aware of the significance and benefits of disciplined and regular investment in equity markets through mutual fund SIPs. The retail investor participation in markets through mutual fund SIPs has hit a record high in November 2021 at Rs 11,004 crore. Interestingly, the industry has grown almost 6 fold in a span of 10 years, from Rs 6.82 lakh crore in 2011 to Rs 37.34 lakh crore in 2021. Though, these are encouraging signs, Indian mutual fund Industry has barely scratched the surface so far and has a long promising road ahead.
Irrespective of any resolutions one makes for 2022, determining to be patient in one’s investment journey can unquestionably be at the top of that list. Distinguished Russian author Leo Tolstoy once said that the two most powerful warriors are – patience and time.
As you are cognisant, most things change with time and at times, quite extremely too. While one cannot control time, for any investor, patience is certainly an indispensable tool. All said and done, after the world has endured over the last 2 years, there are more than enough reasons to be optimistic.
The author, Navneet Munot, is MD and CEO at HDFC Asset Management Company. The views expressed are personal
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