[ad_1]
Global markets including Dalal Street is trading cautious as speculations are high about rising inflation may lead to economic slowdown. Though, inflation for a limited period boosts corporate profits but in case the inflation exists for short to medium term, it may lead to huge dent in the equity markets. However, stock market experts believe that short term crisis in the stock market creates great opportunity for the long term investors. They said that inflation is a short term concern and a long term investor should look at the investment opportunity in such short term sell-off trigger instead of keeping himself or herself away from the market in such scenario.
On how a long term investor can benefit from rising inflation, Manoj Dalmia, Founder & Director at Proficient Equities said, “Investing in the share market during a short term inflationary period can boost corporate profits, especially when companies pass on higher input costs to customers through price hikes. It also means that for investors it is more important than ever to start putting their long-term savings in the stock market.”
Manoj Dalmia of Proficient Equities said that one of the most effective ways to combat inflation is to maintain a well-diversified and fully invested portfolio. In the long run, money invested in stocks tends to outpace inflation, whereas positions in real estate, commodities, and so on can only serve as additional diversification. Cash on the sidelines will always lose value, while long-term bonds will suffer if interest rates begin to rise.
On how investing in stocks amid rising inflation is beneficial, Manoj Dalmia said, “During periods of inflation, value stocks outperform growth stocks. Shares with a higher intrinsic value than their current trading price are considered value stocks. They are typically shares of mature, well-established companies with strong current free cash flows that may decline over time.”
Unveiling investment strategy that a long term stock investor can adopt amid rising inflation, Mayur Shah, PMS Fund Manager at Anand Rathi Advisors said, “Rising inflation is like a double edge sword. Central banks can reign it in with interest rate hikes, but the result of going too high with interest rates brings you out of the fire and into the furnace. Long term investor has to understand context of inflation and policy action taken by central government. In short to medium term till the time corporates are able to pass on the price rise to end consumer definitely the profitability is maintain. However a futuristic call has to be taken on the view how the inflation is going to pan out in coming months.”
Mayur Shah of Anand Rathi Advisors went on to add that a reasonable level of inflation in economy is always healthy rather than too low or too high inflation which denotes either we are getting in to stagflation or bubble respectively.
On how to find a value pick during rising inflation, Manoj Dalmia said, “Companies with high earnings relative to their current share price are considered value stocks. They are also known for having strong cash flows, which investors value when prices are rising. During inflationary periods, shares with higher current cash flows are more valuable than growth stocks with longer-term returns.” He advised long term stock investors to look for good businesses with low capital requirements and companies that raise prices during higher inflation periods, proactively structure your portfolio and include smart positions in asset classes that minimise the effects of inflation.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Download The Mint News App to get Daily Market Updates.
[ad_2]
(This story has not been checked by Kashmir Bulletin and is auto-generated from other sources)
Source link