CEO Speak

January 2021 saw the Sensex breach the 50000 mark which is a landmark milestone in the history of the Indian stock markets. This is a phenomenal achievement considering that just about 10 months back the equity market was going through a huge correction of more than 35%. It has been an unprecedented year gone by which has seen the biggest gloom in the equity and debt markets – COVID, lockdown and the Debt crisis weighed heavily on the mutual fund industry too. However, the latter part of 2020 saw an incredible turnaround in the equity markets which lifted spirits in an otherwise difficult year.

Sectors like IT and Pharma have been the bright spots in the industry which have continued to grow in 2020. Corporations in many sectors have shown agility to adapt to changing conditions, disruptions and maintained business continuity. However, while the equity markets are looking up, the rest of the economy at large is still a long way from recovery. Small and Medium sector businesses have been deeply impacted and there are some specific sectors also like Travel and Hospitality industries which have been significantly hit. The Budget has been growth-oriented and that should help boost the economy and the markets also. Budget 2021 has given a strong capex push of 5.54 trillion rupees ($75.76 billion) and infusion of capital in the PSU banks for providing continuous credit access to wholesale and retail borrowers. This, combined with the enhanced spending on the health sector, will go a long way in supporting economic recovery. The indications are that the government is going to do more to promote growth rather than maintaining fiscal discipline. We welcome the positive moves which are much needed for growth across sectors.

We at L&T Mutual fund at the time of market crisis in March 2020 had maintained with our investors that one should stick to the fundamentals of investing and stay invested as per their financial goals. We advised them not to take any knee jerk reactions basis panic in the markets. We are glad that many investors showed a lot of maturity and resilience and much better post the market rebound now.

Even as the markets have rebounded, we are sensitising all our investors not to get carried away by the euphoria and yet again, stick to their investment objectives. We expect the markets to be volatile but, with an upward thrust, given that we are seeing multiple positive steps been taken by the government to boost growth.

Fixed income space also has opportunities to be tapped and one needs to be invested basis the tenure and be mindful of the quality of the portfolio. Funds with more than 65-70% of their portfolio in AAA+ rated papers should be looked for an investment horizon of over 3 years, as they are likely to give better post-tax returns than Bank FDs.

We believe in the growth story of India. Despite the short-term bumps, we have seen many small, medium and large companies being resilient and turning around. Many businesses that were disrupted because of the lockdown have put their machinery together and are getting back on track as their business models are fundamentally sound. So, investing for the long term is the way forward and generally the equity markets continue to give better returns than other asset classes.

We wish you a Happy and Healthy 2021. Stay invested, Stay safe.

Source: Business Standard, BSE

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