CPI Inflation Falls; Food Inflation Rises
- CPI inflation fell to 4.83% in April 2023 YoY, however, food inflation remained high at 8.70%.
- Rising food prices can diminish household disposable income and reduce your savings.
- Diversifying your investments across different asset classes such as stocks, bonds, and real estate can mitigate the impact of inflation.
- Investments in equities and commodities (gold) often act as a hedge against inflation.
Borrowing Costs to Remain High
- The credit deposit ratio of banks reached a high of 79%, indicating that banks have disbursed 79% of their deposits as loans, surpassing the normal range 65% to 75%.
- To attract more deposits, banks might offer higher interest rates. Consequently, the borrowing rates may also remain high.
- You can increase your savings by opting for fixed deposits in banks. And if you are a borrower, consider paying down high-interest debts, such as personal loans.
- If you’re planning to take a new loan, opt for a floating interest rate or wait until the reduction in interest rates.
Unemployment Trends & Importance of Emergency Funds
- The unemployment rate in India rose to 8.1% in April 2024 from 7.4% in March 2024, according to the CMIE survey.
- Given the uncertainty in the job market, having a robust emergency fund is crucial.
- You should have enough funds to cover at least 6 to 9 months of living expenses.
- Increasing your allocation towards bank FDs or other liquid instruments and avoiding unnecessary expenses is advisable.
Note: A person is categorised as unemployed “because of a lack of job and where such a person is actively looking for a job”.
Strategic Investing during Volatile Markets
- Since 1st April 2024, the NSE Nifty 50 index increased by 0.6% (as of 17 May 2024), while in FY2024 it registered a growth of 28.6%.
- Foreign investors withdrew ₹86.7 bn from Indian equities in April, while domestic investors invested ₹441.0 bn.
- Given the volatile market sentiments due to high global inflation and ongoing Lok Sabha elections, opting for SIPs and diversifying your investments across sectors is advisable.
- You should maintain a long-term investment horizon to avoid short-term market fluctuations.
