Markets trading at lifetime high even when economy is not doing good

Investors are perplexed whether to book profits or invest more funds in the markets. This is a strange situation, where the markets and economy are not moving in the same direction. The biggest boost to the stock market in the recent times is that the Government intervenes as and when required by the corporates. This can be seen in reduction of interest rates and corporate tax cuts. The investor’s confidence in the recovery of economy is at its peak. However, the unemployment situation and rising inflation remains a challenge to the government in 2020.

We may see a gradual shift of funds flowing to large caps into mid caps and small caps. This is predominately witnessed in the valuations of the large caps. In this regard, investors are advised to have a portfolio mix of multi cap stocks and to diversify the surplus, if any in the balanced funds of large AMC’s.

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