Teji Mandi: Three things investors should know on January 8, 2021
Teji Mandi

LIC teaches the golden rule of investing:

For LIC, the current financial year appears set to be its best year in terms of equity returns. It has booked a net profit of Rs 33,000 crore in equities in 9MFY21 as against Rs 18,000 cr during the entire last fiscal.

As per an EconomicTimes report, LIC also raised its equity investment by 60% in the first nine months of FY21. It purchased equity worth Rs 60,000 crore in 9MFY21 as compared to Rs 40,000 crore in the same period last year. LIC had purchased equities worth Rs 61,540 crore during the previous fiscal year.

"Once we ensured that cash flow is enough to tackle the claim settlements, we started buying the equities during the crash." ET article quoted LIC Chairman as saying.

The market tanked to a four-year low amid the pandemic and LIC was able to make the maximum use of the situation. Buy the fear and sell the fear is a golden rule of investing. And, India's largest institutional investor has simply followed it during the market crash.

LIC's approach has highlighted the importance of those golden words and holds a great lesson for retail investors.

M&M opts for a price hike:

Mahindra & Mahindra (M&M) has hiked the prices of its range of personal and commercial vehicles. The price rise will be in the range of Rs 4,500 - Rs 40,000, depending on the model and variant.

The announcement is in line with expectations. Many automakers have opted for price hikes given the rise in raw material prices.

We are a little cautious and fear that demand might get affected due to the price hike. Especially at a time when sentiments are just about picking up.

However, managements have been fairly positive after the December numbers. They appear confident about demand sustainability. Their exuberance is a strong indicator that companies do not see the price hike as an issue.

Retail inflation expected to cool off in December:

A Reuters poll suggests a sharp fall in India's retail inflation in December. The inflation could fall within the RBI's target range of 4% + or - 2% on either side.

The food prices have started to correct since the restoration of supply lines, aided by good monsoons. That is the prime reason behind the optimism.

Inflation, if moderated, will be a great relief for the RBI. Under the pressure of inflation, RBI has little flexibility to take market-friendly measures.

With tamed inflation, the central bank could keep the stimulus going. It could also feel free to extend further policy support to boost growth.

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