Reality Check, Markets! 2013 VS Today.

Remember 2013 ? Federal Reserve started its bond tapering and our markets fell viciously, like every other market in the world. Change in monetary policy stances, In accordance with a likely tapering of bond purchases & fears of inflation, is beginning to strain the international finance markets. Bond yields have risen sharply in both Advance & Emerging Market Economies. China’s Evergrande group fiasco continues to sour the mood.

The US dollar has strengthened sharply while Emerging Market currencies have weakened since early September, with capital outflows in recent weeks.

Is it different today, are we better off than 2013?

Let us examine some key data points & evaluate various facts. In 2013, we were a part of the “fragile five”. Our Current Account Deficit was high. It had touched 4.8%. As on 31st March 2021, it has ended in a modest surplus of 0.9% of GDP (Gross domestic product) .This surely is very heartening, Today GDP is fully financed by stable flows & hence there is no pressure on rupee.

Although fiscal deficit is high , it is not much of a concern today. While the huge foreign exchange reserves cannot protect the country from shocks, it would definitely help in keeping order. In FY21, India added over $100 billion to its forex reserves, which are still growing in FY22 so far & are at $637.5 billion today. This is more than double the level in 2013 when it was $292 billion, despite desperate measures taken by RBI to attract inflows.

Markets Become Volatile, If There Is Dollar Outflow.

In such a scenario RBI may enter the forex markets to contain the volatility and may not use any monetary policy instruments, as were used earlier. Such a huge & qualitative shift in policy mindset & pattern.

As an economy we are in a much healthier position then what we were in 2013.

Look At Some Of These Data Points

PMI (Purchase Manager’s Index) is higher in September, than in August’21Service sector continues to expand
CPI (Consumer Price Index) inflation is trending down & is firmly within RBI’s target zone of 2-6%
WPI (Wholesale Price Index) is still high but the direction of change has been down
GST Collections are robust.
Exports have crossed the $30 billion mark for seventh straight month.
Cement production is up.
Our growth has been forecasted at 9.5% by both RBI & IMF.

All high frequency indicators point to gathering economic momentum. Credit growth & rising energy prices are the only worries, at this point in time.

Summing up, today our economy is on a very sound footing and definitely in a lot better position than where we were in 2013.Total insulation from global currents is a delusion. But presently both GOI & RBI seems to be working in tandem and this will help minimize the impact….The elephant, has started to dance!

Health is wealth. Good health is not just the absence of any illness, but complete physical and mental wellness of an individual.

In today’s world, stress affects both physical and mental health – and one contributor to stress is the state an individual’s finances.

We all have financial goals we want to reach, and savings just don’t cut it. It’s important to invest. While we invest, how do we know we’re doing the right thing for our goals?

Here’s where your financial doctor, or advisor, comes into the picture. Just like you need a doctor for your physical or mental health, you need one for your finances too.

So, how can your financial doctor help you?

Understand your financial health –Your financial advisor will work with you to assess your current financial health – your assets, liabilities, income and expenses. He/she will also consider any expected future obligations (insurance, taxes, other long-term expenses) and sources of income (pension, gifts, etc.) to get a complete picture of where you stand.
Assess your goals –Once your advisor maps out where you stand, he/she will understand your investment goals, time frame and risk appetite. An understanding of risk appetite will allow your advisor to determine your asset allocation. He/she will also assess your retirement needs at this stage. Invest now
Build the financial plan –The next stage is where your advisor charts out a comprehensive financial plan for your goals. This plan will include details such as where to invest, how much to invest, for how long to invest. He/she has the expertise to understand how all these products will work in tandem for you to achieve your goals. The plan will also look at your retirement plan, your projected withdrawal rates during retirement and have the best- and worst-case scenarios for your expected life span. If you’re already investing for your goals, your advisor will review your current habits and suggest a course of action. If you’re investing without goals in mind, your advisor will help you allocate your existing investments for your goals. Read why goal-based investing is important here. Once your plan is ready, it’s on you to implement it.
Help you understand where you’re investing –When building your financial plan, it is important to understand the products you’re investing in. The pros and cons, how it fits in your portfolio, what it can do for you – your advisor will help you with this.
Regular reviews and adjustments –It’s a good idea to revisit your investments regularly to check if you’re on track, review what you’re doing and see if you need to adjust your plan to incorporate new goals or modify/remove existing ones. Depending on your needs, your advisor will suggest changes to take you closer to your goals.

Financial advisors are the doctors you need for your financial health. With their expertise, you can get the best out of your investments.

Tag: Mutual Funds