Since low interest rates made traditional investment options like fixed deposits and debt instruments less appealing, investors turned to the stock market for inflation-proof returns. Despite the pandemic, stock prices increased by more than 100%. To aid their faltering economies, governments all over the world poured cash into the system. The stock market benefited from this liquidity. Is it possible that investors will have the same luck in 2022?
Unlikely. With the Fed expected to reduce its bond purchases later this month, market liquidity may begin to dwindle. Profits have already been booked by FIIs. So, what should you do? In 2022, where should you place your money? Here are various potential investing concepts to examine.
As the pandemic forced billions of people to go on lockdown and interact electronically instead, technology-driven stocks ruled the market in 2021. Cloud computing emerged as the obvious victor. It soon established itself as the major infrastructure for millions of individuals forced to work and study from home.
The spike in demand for cloud software resulted in significant profits, and major IT companies like TCS and Infosys reaped the benefits. E-commerce, digital payments, artificial intelligence, 5G wireless, and videoconferencing were among the other technologies that enabled the transformation.
Despite the fact that lockdown restrictions have been loosened and an economic recovery is on the horizon, these patterns are projected to persist in 2022. Businesses who have taken the choice to adapt and evolve with the times will be included in the adoption of new technologies, not only IT companies. Consider investing in firms that have revolutionized their businesses using technology and are primed for development in the next few years to take benefit of this technology-driven growth.
The influence on inflation was the most visible result of the pandemic's many effects on the economy. Consumer inflation was already high before the virus hit. India was in a tough position, with inflation above the target. Economic growth also slowed to 3%, a record low.
Then came the pandemic, which created such severe supply pressures that inflation remained high across the board. While the Indian economy is slowly rebounding after two viral waves, inflationary pressures remain high. Inflationary pressures are putting pressure on large businesses, which are passing the cost increases on to consumers, putting a strain on family budgets.
This tendency is likely to continue in 2022. Inflation is likely to be somewhat higher than pre-pandemic levels during the following five years. You may invest in gold to protect yourself against inflation. For its returns, gold may be used not only as a hedge, but also as a significant strategic component in your portfolio.
As utilizations begin to rise in 2022, discussions over capex are anticipated to return to the forefront. Many businesses have already declared intentions to expand their capacity.
Concessional corporate taxes, a commodities supercycle, and cheap loan rates are all helping to boost investment demand. Aside from that, demand for real estate is increasing. Over the following several quarters, structural growth in affordable housing is anticipated to solidify this position even further.
REITs and InvITs are new vehicles that enable developers to monetize revenue-generating properties while also allowing investors or unitholders to participate in them without actually owning them.
As the Fed prepares to make a policy shift in 2022, the stock market might be exceedingly turbulent. In the recent several weeks, benchmark indexes have witnessed a lot of volatility. This trend is likely to continue in the next year.
To deal with this, cautious investors should invest in low-cost index funds that have a low volatility profile. As the name implies, these funds invest in equities that are part of an index, such as the Nifty 50 or the Sensex.
If a fund is benchmarked to the BSE Sensex, its performance over time will be comparable to that of the Sensex. As a consequence, automatic diversification occurs, lowering your total risk. Because no active management is necessary, expenses are also reduced.
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