The Indian stock market is off to a rocky start this year, owing to mixed global cues amid concerns about the Omicron variant of COVID, faster-than-expected rate hikes, and now the Russia-Ukraine crisis. Not so long ago, India was one of the best performing emerging markets with the Nifty50 giving a return of a little over 30 percent between January 1 and December 15. The Nifty 500 rose 36.8 percent during the period.
After the second wave of the pandemic, the global economic outlook remained healthy. The market indices rose over 20 percent in the first 10 months of 2021 as the number of young investors multiplied. The thriving tribe of retail investors in the stock market helped equities outperform traditional investments such as gold and real estate.
India’s two-year bull run may have yielded exceptional returns but also brought forward potential risks not seen in 18 months. In fact, right before the government was to announce the Union Budget for FY23, weak global cues wiped out Rs 10.36 lakh crore investor wealth from the Indian stock market in four days. Not too long ago, India saw some of the worst IPO market debacles after CarTrade, Paytm, Windlass Biotech and other stocks wiped out 52 percent of investors’ wealth.
Where should you invest in a highly volatile market?
A disciplined and diversified approach can help Indian investors convert risk into opportunity.
Balancing risk portfolio with lease financing investment options
Digital advancements have democratised many new-age investment opportunities such as lease financing. An asset-backed investment such as lease financing or inventory financing presents a unique opportunity for investors to co-invest money in leasing assets -- such as electric vehicles, furniture, EV batteries and Cloud kitchen equipment – and get fixed monthly returns.
Lease financing can help investors to strike the right risk-reward ratio in an investment portfolio. It will further enable companies looking to leverage lease financing and access new forms of capital. These companies can then grow without raising equity or debt but using leasing as growth capital.
The biggest risk for the investor, if any, is that the company leasing the asset from the investor defaults on its payment. Even then, investors can always recover the asset to monetise it or resale it. This kind of investment thus significantly reduces the probability of capital loss.
The market correction we're seeing right now is not surprising, and somewhat overdue. The current scenario offers an excellent opportunity to look beyond traditional investments and diversify the investment portfolio. Investors can explore market- and non-market linked investment opportunities to balance their portfolios and reduce the impact of financial risk.
--Nikhil Aggarwal is Founder and CEO of Grip. The views expressed in this article are his own.
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