CEO Speak May 2023

May 2023 saw the Sensex holding above the 62,600 levels and the Nifty above 18,500 levels, sustaining the outperformance of the Indian equity markets compared to the Asian peers and other developed global markets. FIIs added buoyancy to the markets with record inflows. The various reports and indicators have also been suggesting sustained growth of the Indian economy despite slowing down global growth conditions. Government and RBI interventions and structural reforms have boosted the growth engine of the country and corporate earnings have also been showing good numbers in the recent past. The banking sector also has been posting good profits and low NPAs, which in turn means capex investment now from the private sector also should gain momentum.

While the overall outlook is positive, which is great for business and investors, medium term volatility in the financial markets and uncertain geopolitics always pose risk. We at HSBC, believe in advising our investors to stick to the fundamentals of long-term investments for wealth creation and meeting one’s financial goals. We are also happy to see a lot of matured investors showing trust in the markets and the fund houses and understanding the market cycles.

To all new investors in the mutual fund space and the equity markets, here are a few important points which may help you sail through volatile times if and when they come into a market which is in general showing positive movement currently.

Points to remember for all new investors:

Identify your financial goals! People do not identify the goals for a financial investment, hence, often they cannot make up their minds on what kind of returns they should expect from what period of time and from what nature of fund. For eg., saving for an international travel can be a financial goal for one year for which they may choose to invest in a debt-oriented fund. However, a child’s education can be a 10-year financial goal for which one may choose a diversified equity fund. One must always be conscious of the fact that returns depend on the tenure of the investment and the asset allocation done basis their own risk profile. Hence, it is best to identify the financial goals and have the investment horizon decided as the first step towards prudent financial planning.

Planning for Tax is often done towards the end of the financial year and not throughout the year. A Systematic Investment Plan (SIP) in an Equity Linked Savings Scheme (ELSS) started at the beginning of the year may be a wiser investment than a lump sum investment at the end of the year. Often it is seen that people do not have enough liquidity at the end of the year to make their tax-saving investments. Hence, earmarking funds which give one tax benefits right at the beginning of the year or at regular intervals during the year puts less last moment stress on their finances.

If markets are volatile – many stop their SIPS ….Not a wise thing to do!. A lot of historical data validation is available today and we humbly urge all investors to go through that data before making any hasty decision. One must not take a knee jerk decision of withdrawing in a volatile market if one’s investment tenure and investment goal has some more time in the offing. SIPs are now a proven way of wealth creation of a long period of time.

Don’t blindly chase returns – don’t get carried away! People tend to over review and over analyse the returns of different schemes and there is a trend of switching between schemes the moment one finds the returns of a particular fund doing slightly better than the other. Like your investments must have a goal, every fund also has an objective, and it is only fair to give the requisite time to a particular fund before jumping onto a decision of switching out of it.

Stick to the fundamentals of investing – Invest according to your financial goals, tenure of investment and risk appetite.

Happy Investing and stay invested!

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