Rising interest rates rattle markets across the world. Our market is no exception. To add to the problems of the equity markets, there is the overhang of a crisis in some asset management companies. This could further create a crisis of confidence in the equity markets going forward.
The silver lining was the success of the LIC IPO. This issue was priced very favourably for investors and won overwhelming support from all stakeholders. It remains to be seen how the markets stabilized post the LIC IPO. The widely held belief that the markets tend to buckle after a hugely successful mega IPO, will be tested in the coming weeks. Obviously, there are more reasons than a mega IPO to keep the markets under pressure. In this environment, there is opportunity in companies that are well-positioned to the emerging economic scenario. Companies that benefitted from COVID and its impact may probably not do as well as companies that are better positioned to tackle inflation.
Naturally, equity investing in a rapidly changing context will need to adapt. The coming weeks will see the Indian investors adapt to multiple factors, including a further increase in interest rates, a reduction in liquidity, a further rise in commodity prices and sustained outflows from Indian equities. The markets have not seen such all-around adversity for a long time, and investors would need to adapt their investing to such an adverse situation.
Adversity certainly provides investors with opportunity, and it is entirely up to investors to turn such adversity into a winning opportunity.