Indian equities have been on an upward trend in the last month despite low net participation by institutional investors amid an acceleration in COVID cases in the country. However, the rise in retail investors and global liquidity has led to Nifty and Sensex rising around 7 percent in this period.
Global equity markets also maintained their gains in the last one month despite geopolitical issues brewing in the Middle East and South China sea region and a historic slump in the US GDP in the second quarter of 2020.
In a recent report, IIFL Securities explained, "global market participants, despite rising risks of a severe recession and geopolitical tensions, seem to be betting on the assurance of prolonged availability of abundant liquidity and commitment of every measure by the developed markets to revive the economy."
It also noted that a liquidity-driven global rally has led to an expensive valuation of the benchmark index and that they might remain expensive due to rising retail participation.
However, acceleration in the COVID cases across the country is posing a serious threat to economic recovery for India, IIFL believes.
The brokerage advised equity investors with a high-risk appetite to opt
for a stock-specific approach while investing during this uncertain macroeconomic environment. Thus, they can consider investing from our recommended list of select stocks chosen using a bottom-up approach, it added.
Meanwhile, long term investors with a low-risk appetite for direct equities can continue to invest in equities through mutual funds in a staggered manner, suggested IIFL, adding that such investors are advised to top up their SIP amount to bring down their average cost.
It has come out with 3 different portfolio types for varied types of investors - aggressive, moderate, and conservative.
It notes that aggressive portfolio targets above-market returns using high beta and midcap ideas, while moderate portfolio uses a Multi-cap approach to reduce volatility and conservative portfolio is built with objectives of less volatility and capital protection.
First Published: IST