Markets have seen corrections of 10-20 percent in the last few days in the face of ongoing global events. The geopolitical considerations with the Russian invasion of Ukraine have already made markets more bearish after investors were already spooked by the US Federal Reserves’ hawkish stance in order to combat the reigning inflation seen in many parts of the globe.
With savvy investors keen to buy the dip, Zerodha co-founder and India's youngest billionaire Nikhil Kamath says that they should wait.
“Markets haven't corrected that much. They've gone up 100 percent and come down 12-13 percent. But in terms of volatility, whenever you see 10-12 percent corrections, they tend to correct a bit more. So, I would not like to say that it's a good time to buy,” Kamath said in an interview with Mint.
“So, I think people should wait, see what happens with inflation and see what happens with the geopolitics of it all. I don't think the time is right yet to ‘buy the dip’," he added.
With seemingly no resolution on the horizon for the Russian invasion of Ukraine, geopolitical factors continue to remain tense which may further contribute to downward pressure on equities.
The sanctions that have been imposed on Russia have already led to the prices of crude hitting $115 a barrel. Prices of commodities like steel, palladium, iron ore, copper, zinc, and aluminium have also been increasing while food prices are seeing a steady rise as well. These changes in prices are expected to exacerbate the inflationary pressures and attract a stronger hawkish stance from central banks.
As global macroeconomic conditions remain uncertain, further volatility is almost a guarantee, especially for equities where many analysts have criticised the stretched and imaginative valuation for new-age companies.
The final word of advice from Kamath is to only allocate 30-40 percent in equities. “So, stick to large-cap pay heed to expense ratios do not put more than 30 to 40 percent in equity, and get as much diversification as possible,” Kamath said.
