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- Inflation inline with expectations
- Inflations to be lower in next 6 months
- Focus on banks and Blue-chip IT in India
US consumer price index announced on Wednesday jumped to 7% for December 2021, most since June 1982. Although the inflation seems to be high, the market hasn’t been affected much, more overall 3 major average indices close in green mostly due to the fact that the inflation was in line with the expectations.
To understand more on the reasons behind such high inflation jump and its likely impact on the financial markets, ET Now spoke to Mark Matthews of Julius Baer on Beat the Street. Max highlighted the facts that inflation is transitory, and the US inflation is line with the expectations.
The inflation was seen more due in durables as individuals with spending power have purchased more durables and more due to demand-supply mismatch in housing. It also is because of the supply chain issue due to Covid lockdown, however we see some supply chain disruptions next month and will ease. He expects the inflations to be lower in next six months as the supply chain issues eases.
As with rate hikes we expect less liquidity in the markets and to understand the impact for India, Mark has suggested Indian markets are attractive. Considering the investment opportunities in India and the sectors to invest in, Mark’s focus is on banks and Blue-Chip IT companies. Suggesting having exposure to cyclical trend one should choose bank and for exposure on digital theme one choice blue-chip IT companies.
In IT sector, Cloud and AI is the theme to be the main growth driver. IT companies providing these services do well. Thus, blue-chip Tech Stocks to outperform in India in next 5 years. Banks is the most attractive theme in the US. In India, the focus of equity investors should be on the balance sheet of the banks. The recovery in banks has been seen across all banks.
Although Big IT companies with strong profit and cash flow, the IT companies with week or no earning is what Mark is considers to underperform in 2022.