Posted On Tuesday, Sep 14, 2021
With significant control on the agricultural output, rains have a ripple effect on the demand and supply chain of India. Good rainfall paves way for a self-reliant economy. When monsoons are good it means agriculture production is good, that means that the farmers have a good income which means that rural India demand picks up in sectors such as FMCG, automotive, etc. A good monsoon & bumper farm production also leads to controlled food prices, which further helps to keep a tap on the CPI inflation since food accounts for 50% of our country’s consumer price index. It also encourages demand for water conservation and electricity generations. The vulnerability of the southwest monsoon winds and their substantial impact near-term impact on the economy is tracked by economists, investors, and government agencies.
In simple words, it denotes the underutilization of the labor supply. The economy's efficiency and effectiveness to absorb its labor force is understood from this statistical figure. The cascading effect of the virus-induced lockdown, that led to disrupting businesses and thus increasing the unemployment rate is still hovering around. Businesses are slowly catching up and allowing the job market to see the light of the day. Low workforce turnout directly means less productivity in the economy which again disturbs the consumption story. As we have often said, job creation is India’s biggest long-term socio-economic challenge.
The Pandemic has highlighted the importance of healthcare infrastructure across the globe. The industry in India is now growing at a brisk pace to strengthen and tackle any future emergencies. In the Union Budget 2021-22, this year, Health & wellbeing were announced as one of the 6 pillars of the session. We would like to see more spending on improving basic health infrastructure in rural India.
At Quantum, we anticipate a long term GDP estimate of 6.5%. Adding inflation to this figure will give nominal GDP of 11.5%. The returns of companies is likely to grow on par or at higher rate than the nominal GDP, thereby offering you the potential for risk-adjusted returns over the long term. This basic math is the key behind investing in the equity mutual funds in India over the long-term.
You can cope with inflation by investing in Equity mutual funds which has the potential to generate long term risk adjusted returns which may be higher than the prevailing inflation rate. However, you should always consider a portion of investment in Gold for diversification since Gold has negative correlation with respect to equity.
When interest rates are too low, it leads to an increased demand for money and raise the likelihood of inflation as we have witnessed in the economy currently. Low interest also means that investors are increasingly seeking option to Fixed Income in search of higher returns. We would caution against this approach. Fixed income investment is for your safety, liquidity and diversification.
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Please visit – www.QuantumAMC.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.
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