Major benchmark indices plunged after inflation data was released overnight in the US. US CPI pressures fell from 8.5% in March to 8.3 percent in April in April, but were still higher than analysts’ estimates of 8.1 percent. and that an aggressive stance from the Fed may continue. Prashanth Tapse, Vice President (Research), Mehta Equities Ltd., said: “Undoubtedly the biggest negative catalyst remains inflation across the global economy. The most recent US Consumer Price Index (CPI) data released for April rose by 8 .3 percent year-on-year, down from the rate of 8.5 percent in March, marking the first decline in inflation in eight months, but still worrying.
Economic data helped the dollar stay at a two-decade high, hurting emerging market equities. At 9:42 a.m., the BSE Sensex was trading 1,024.29 points or 1.89 percent lower at 53,064. Nifty50 was trading at 15,865, down 301 points or 1.87 percent. Mid-cap and small-cap indices lost as much as 2.2 percent.
At home, the market also eagerly awaited the domestic CPI figures, scheduled for post-market hours today. Nirmal Bang Institutional Equities said CPI inflation is likely to rise to 7.4 percent in April from 6.95 percent in March, led by higher edible oil and fuel prices and a gradual pass-through of input cost increases in retail prices, as well as inflation in the services sector, supported by the opening of the economy.
What should investors do?
However, the current dip offers a good opportunity to add equities and India is currently in a better position in economic strength than its competitors in the medium to long term. Investors should exercise caution during these volatile times and follow these rules to achieve good risk-adjusted returns:
Buy for the long term
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “Controlling our emotions, especially greed and fear, is necessary, a short-term mindset is dangerous as investors can get stuck in fundamentally bad stocks or at a very high price Investing for the long term has two benefits: first, you can take advantage of the power of compounding, and second, you can sleep peacefully.”
Investors should perform due diligence before investing and investing in those stocks for which they have a full understanding of the underlying fundamentals. One should study the business model, management quality, competitive landscape, finances and future growth prospects before investing in stocks. This will help them separate the wheat from the chaff. This is a basic requirement before investing, otherwise the mutual fund route is more appropriate.
Understanding risks
Good investors never invest money in an investment without being fully aware of the risks (and potential rewards) involved. By doing so, they take full responsibility for the fluctuations that may arise during the investment life cycle.
Take advantage of the dip to enter quality names
The current scenario, where the environment is full of uncertainty and negative sentiment, is the best time to add stocks with good fundamentals, growth visibility, competitive advantages and reasonable valuations.
Wait for the markets to recover
Yash Gupta, Equity Research Analyst, Angel One Ltd, said: “We expect markets to be volatile in the near term depending on both domestic news and foreign markets. We recommend long-term investors to invest 50 percent of the new fund. and wait for the market to pick up again.”
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