The signs of a drawn-out economic slowdown have been looming in the Indian market for quite a while now. According to a recent report released by the Periodic Labour Force Survey (PLFS) of the National Sample Survey Office (NSSO), the rate of unemployment in the nation was found to be at 7.1.%.
The year has already witnessed a significant decline in consumption in the financial sector on account of the Non-Banking Financial Company (NBFC) and liquidity crises that occurred last year.
In the same line, according to Navneet Munot, the Chief Investment Officer of SBI Funds Management Pvt. Ltd., the market has also experienced a considerable slowdown in consumption in the automobile, airline, fast-moving consumer goods and textile sector over the last few months.
The slowdown in consumption has also resulted in credit bureaus on the lookout for scanty economic growth. In addition to domestic factors, global trends have also played a significant role in the slowdown.
With the prolonged US-Sino trade war escalating for over a year now, many investors and market participants have transitioned to safe-haven assets amid fears of a possible global economic slowdown. This has reportedly led to a decline in the flow of money into investment markets.
Though the present conditions prove to be unfavourable for short-term investments, it is still considered a favourable space for investors who seek to accumulate equity investments.
According to market experts, this might be the right time for investors to accumulate investments to generate promising returns in the future. Investors are advised to continue with their mutual fund SIP rather than withdrawing as the value for money is comparatively higher during this phase.
SIP investments generally give you the benefit of purchasing more units during times of an economic slowdown. In the same line, lump-sum investments can also prove to be beneficial with you being able to buy more units, adding value to your money.
It is advised to allocate your funds carefully between mid-cap and large-cap equities before you start investing your hard-earned money.
In case you have never invested in equities before, you can choose to allocate two-third of your funds towards large-cap equity investments and the remaining one-third towards mid-cap equities. Allocating your assets will not only ensure a stable investment period but also generate inflation-beating returns and accumulate wealth for a promising future.