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Sensex, Nifty may not reflect this year’s stellar returns in 2022. watch out for Omicron, inflation | INTERVIEW

India’s economic growth story remains intact in 2022, however Dalal Street may not repeat its stellar rally in the New Year.

India’s economic growth story will remain intact through 2022, but Dalal Street may not repeat its stellar rally in the New Year, said Nikhil Kamath, co-founder of True Beacon and Zerodha, in an interview with Kshitij Bhargava of Financial Express Online. Nikhil Kamath went on to say that in the New Year, investors should keep an eye on the Omicron variant of Covid-19 as a potential threat to domestic markets, along with inflation and a rate hike by the Reserve Bank of India. Here are the processed excerpts.

1. In the final month of 202, domestic markets corrected nearly 11% from their all-time highs before recouping some losses. What do you think will be stocks for the next year?

Structurally, the history of the Indian economy is still intact. As for equity markets, however, I don’t think we’re going to see a repeat of the market-wide rally we saw in 2021. I think investors have to be very picky about stocks. There will always be opportunities, but investors need to do their homework to see where those opportunities lie, especially as the market seems overvalued. There is still a risk of slowdown due to the Omicron, but the thing about the markets is they have shown how to rebound even during a pandemic so we need to see how things play out.

2. We have seen several IPOs this year. Do you think the IPO rush will continue in 2022?

2021 was an auspicious year to go public as many new age companies head to Dalal Street to raise capital. There has been a lot of talk about valuations, and I still think the markets, especially those around new age companies, are overheating. The premium you pay on these companies should justify their long-term growth prospects.

The liquidity of the stock markets this year has been unprecedented. It has become a natural route for investors as interest rates don’t even keep up with inflation. Additionally, despite the pandemic, there was a lot of optimism about the market in 2021; It usually takes a little pessimism to make up for the euphoria we’ve experienced. Covid, interest rates, and market sentiment all play a role in how IPOs are valued in 2022.

3. Cryptocurrencies have gained traction and we expect some sort of regulation to come on that front. Do you think that cryptos will continue to grow in importance as an asset class?

Personally, I see a lot of activity in this area based solely on the “fear of missing out”. Blockchain as a technology has many ways in which transactions are processed and recorded. However, given the volatility of this asset class, cryptocurrencies need to be regulated. While I see no value in banning it, the government needs to make sure that the crypto market is intelligently regulated and that innocent investors don’t get their hands burned trying to make quick money. RBI is also planning to introduce a digital central bank currency in several countries. In addition, Indian cryptocurrency law will also play a crucial role in shaping the crypto space in India.

4. What advice would you give to young investors who have recently seen their first major slump as they enter the market in 2022?

Financial markets are inherently cyclical, as they have always been. It is time today to be careful, to exercise a little caution, and to diversify. Diversify across different asset classes. And unless you have the breadth / inclination to invest yourself, it would make more sense to invest through managed funds.

For young investors – you have age on your side, so you can be more risk-taking. They can be invested more in stocks than in fixed income products. And when you invest in fixed income products make sure you maximize PPFs / EPFs etc. Finally, don’t let FOMO guide you in your investment decisions – always do your own research.

5. What do you think will drive equity markets in 2022?

Omicron is something we cannot ignore. The way governments are dealing with the situation will also cast their shadows on the market. Right now, the virus doesn’t seem that deadly, but it’s spreading faster so I think the government’s containment and precautionary measures will have an impact on the market as well. Hopefully 2022 will see the beginning of the end of this pandemic.

Another factor that we need to consider is inflation. We have seen commodity prices fall, which is some relief, but we also need to be mindful of global inflationary pressures and how they are affecting our economy. Should rates rise, we could see some correction in the markets. And expect some inflation, but it could be cause for concern if it skyrockets.

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