In this article, we will discuss whether there is a Recession or GDP Growth slowdown ahead for the Indian Economy and when is the right time to invest the lump sum amount in the equity market. So, let’s get started!
GDP Growth Slowdown or Recession?
- Specifically in Europe Countries like Germany and France might face recession because these countries have high dependencies on Russian Oil, as 60%-70% of their energy demand is being fulfilled by Russia, and hence current sanctions by Germany and France on Russian Oil and Gas.
- The US economy is likely to witness a GDP Slowdown, but the debate about recession is also going on. The GDP Growth rate of the economy could be lower single-digit at around 1%-2%.
- In India, recession or aggressive GDP Growth Slowdown looks quite impossible, but the economy can witness a lower than expected GDP Growth rate of around 6% to 7%.
When to Invest Lumpsum in Equity?
- Currently, the way the Reserve Bank of India and across the globe are raising interest rates, the Fixed Deposit instrument might look attractive and its interest rates might also cross the mark of 8%.
- India’s 10-Year G-Sec Yield is currently trading at between 7.4%-7.5%, which is also expected to cross the mark of 8% in the coming time as per the current scenario.
- The Credit Growth in the country was 13% in the last 15 days while Deposit Growth was 8.3%, and the credit growth was higher by almost 5%, this also indicated the bank will need more money for which there might be an increase in interest rates on the deposits in the bank.
- Currently, the equity market is yielding negative returns on the last 1-year to 1.5-year basis, wherein the debt instrument starts looking attractive.
- Moreover, the Foreign Portfolio Investors (FPIs) are aggressively selling off their stake and the Domestic Institutional Investors (DIIs) or Retail Investors could not handle the pressure for a much longer time, and hence a bottom in the market might take place which can be a great time to invest lumpsum amount by the investor.
What Should Investors Do?
The period when the equity market becomes less attractive as compared to the debt market happens usually when the equity market yields negative returns, interest rate rise, and there is selling by foreign investors, this could be the point of time wherein an investor can think of investing the lump sum amount in the equity market. Overall, across the globe, India’s economy looks to be in a better position amid the ongoing debate about economies entering into recession or witnessing GDP Slowdown.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.