The bond buying by the ECB and the Federal Reserve introduced liquidity into the markets across the globe. How the third installment of Quantitative Easing, which is linked directly with the economy, is going to boost the economy compared to the first two still remains dubious. The Indian equities also rallied on the international news. The national reforms news helped the markets reach their yearly highs.
The sentiment driven markets may see rallies in short term. The fact that the crisis management techniques being implemented are failing to address the fundamental issues makes the sustainability of the market rallies difficult. We at ArthaYantra are fiscal hawks, and have been trying to forewarn about the shallowness as well as the fragility of the current world markets.
Expecting the markets to be volatile, adding fresh positions in equity would need prudence. Hold on to your current positions over a run of couple of months. Expect to see a good one year return on debt instruments whose horizons are short term to midterm. Fresh positions in debt can be added while holding on to your current positions. Holding positions in a well diversified portfolio with a suitable composition of debt and equities has always been advisable and beneficial, especially during such times of uncertainty. The investors who have been making systematic investments can see the averaging of price playing its part.
