Global inflation rises. Commodity prices may fall.


Quick Edit:

Every election makes psychologists out of equity investors. With every election, the tribe of arm chair experts is growing. We have fund managers meeting politicians to understand which way the tide is going. If only the politicians knew, they wouldn’t be doing what they do. Why waste money on a losing election? Yet, in this game of groping in the dark, everybody is looking for answers that aren’t quite there. While they search for political trends, the markets languish as valuations drift mindlessly with little or no connect to intrinsic value. The fear that markets will crash if there is no clear winner is everywhere. Nobody fears the fact that everybody will be caught unawares if there is a clear winner. Our sense is that there will be one. And, we believe in playing for a clear result in everything we do. It is better to be trapped invested in the market than be trapped outside it without any worthy investments standing in our name.

Economies prosper despite politics. Not because of it.

Invest speak:

Inflation seems to be rising again. This time it is in some food articles like milk. With one commodity or the other feeling the heat of inflation, it has become virtually impossible for the RBI governor to reduce interest rates. In fact, this is unlikely to happen in the near future. On the contrary, we could even see more rate hikes. This essentially means that we can’t take our debt investments lightly and one must put some strategy into it as well. It is vital to lock into longer duration instruments at higher rates of interest. Investors trapped in dynamic bond funds invested before the 3% hike by RBI last year will need to re look at these investments as their gestation now seems to extend long into the future. It makes sense to look at better alternatives than wait for these investments to deliver. Debt has to be the focus now as rates threaten to rise further.

Inflation will rise globally. Bet on a fall in commodity prices.


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