Aggressive rate hikes by central banks around the world to rein in soaring inflation could prove counterproductive in the near term, Emkay Wealth Management said on Wednesday.

Noting that geopolitical tensions, soaring crude oil prices and worries about recession in developed countries are among the major risks facing the markets, Emkay Wealth Management however said that India does not fear any major risks.

However, there are risks associated with slowing exports and currency depreciation, the company said in a webinar.

The Indian rupee plunged to an all-time low of 81.93 for the dollar on Wednesday.

“Inflation has become a concern for most major economies and central banks are resorting to aggressive rate hikes. The move could raise inflationary pressures, proving counterproductive in the short term. dollar and crude are the two key metrics to watch over the next few quarters,” said Joseph K Thomas, head of research at Emkay Wealth Management.

Central banks around the world, including in the United States, Europe and other countries, have raised interest rates sharply in recent times to contain high inflation, mainly triggered by geopolitical tensions affecting supplies. .

Regarding asset allocation, he said careful diversification of asset allocation can help create long-term wealth for investors.

Vishal Amarnani, Head of Fixed Income, Emkay Wealth Management, said: “We are seeing fund flows into fixed income and debt due to rising rates, as well as broader conviction that rates will go up from here.”

The company said that the liquidity of the system is in deficit by more than 21,800 crores. This, combined with the delay in the inclusion of Indian bonds in the global bond index, also drove government bond yields higher.

The benchmark yield returned to the 7.40-7.50 levels as expected. “However, yields on long fixed income instruments have risen and look attractive in the short to medium term,” Amarnani said.

Acknowledging the importance of diversification across asset classes and stock markets, he said investors should consider Indian manufacturing as a key investment theme as “we see the deployment of the China 1 after the pandemic.

As far as the market and the flow of funds go, the road ahead will be very different from the previous two years, he said.

Emkay Wealth Management, which currently offers tailored services to more than 1,600 families, expects its assets under management to reach 10,000 crores in the next 3-5 years. The company, a subsidiary of Emkay Global Financial, has an AUM of 1,900 crore.

This story was published from a news feed with no text edits.

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