After a recent rebound in the Indian equity markets where we saw Nifty 50 jumping back to 18000 plus levels, markets have given up all the gains. Today, Nifty50 has touched below 17000 levels.
The rising global inflation and steep rate hikes by the US Federal Reserve recently has come heavily on equity markets globally resulting in heavy fall in the equity markets all across the globe including Indians markets.
With inflation likely to remain a major issue across the globe for a few months and no visibility of near-term resolution of Russia-Ukraine war, equity markets across the globe are likely to remain volatile with a negative bias.
Currently most of the major economies and their central banks are busy in controlling high inflation which will be at the cost of growth. This is surely not a positive sign for the equity market.
In such a scenario, investors, who have majority of their investment into equity and equity focussed mutual funds, are looking for ways to address this situation as they are not getting expected returns from their investment.
The current economic situation globally is still full of uncertainties and therefore it is very difficult to predict the timeline for rebound in the equity markets. This means that overall returns from investment in equity and equity-based mutual funds are not likely to fetch desired returns for the investors in the short to medium term.
What Indian investors can do in such a situation?
However, all is not lost for the investors. In such a situation, depending upon their financial situation and risk-taking abilities, investors should move a part of their investment into fixed income products like Fixed deposit, Bonds, Non-Convertible Debentures (NCDs) and PPF which are offering positive returns net of inflation.
Some of these products offer a lot of flexibility to investors these days in terms of investment amount, payment of interest and principal amount at regular frequencies.
For example, some of the bonds are giving yield upto 11-12% and a few NCDs are offering yield upto 13.0-14.0%. This is as good as the average returns that an investor gets from mutual funds investment and with lower risk. Also, effective yield on fixed deposits of some of the NBFCs is around 10.00-10.50% for senior citizens. There are some P2P platforms also which are offering returns upto 10% on investment.
So, there are many options available for investors under fixed income products where they can invest. After understanding all the aspects of these products, investors can deploy part of their investment in such fixed income products. This will ensure that a part of their investment would fetch them definite returns and would help them stabilise their overall investment portfolio.
What options are available for senior citizens?
The current economic and market situation is especially difficult for senior citizens who have investment in equities and mutual funds as returns from these assets have been negligible in 2022. As the situation is not likely to change much in coming months, senior citizens can also park some of their investment in fixed income product categories.
However, the criteria for selecting fixed income products should be a bit conservative for them. They may choose those fixed income products where risk is minimal. Like in the case of bonds and NCDs they may choose those products which are either AAA or AA rated.
Similarly, they should choose fixed deposits with those companies who have good credibility in the market and are offering higher returns as well. They can also opt for those products where there is regular income generation so that they can meet their daily needs.
Overall, it is advisable for all categories of investors to bring more stability in their investment portfolio by properly diversifying their investment based on their risk-taking abilities and current financial requirements. Just sitting and waiting for markets to rebound may not be good for most of the investors.
Investors can also seek help from their financial advisors in such time to understand the new products very well in terms of risk, returns and tax applicability.
Mukesh Vijayvergia, Founder of Nishkaera Financial Advisory and Wealth Management Private Limited