Ignore the noise

Global Interest rates clearly will play the Joker in the pack. They will determine global market sentiment. Whether they rise or fall or do nothing, the markets will find reasons to be unhappy with them. The reasons are simple.

The US economy hints at raising rates and then chickens out of the move when its economic data turn weak. Europe is still looking to run its quantitative easing for much longer periods of time. This rules out a rate hike in Europe. India, on the other hand is hoping to cut rates. Japan wishes to hold its rates.

Never before in recent history have we seen so many contradictory stances among global central bankers about what is good for their economy. In this scenario, the global market sentiment will be unsure about what will be the key driver. Where volatility will originate from is also quite unclear.

Indian investors must now put global factors behind and invest aggressively on the basis of domestic valuation, the prospect of a better monsoon and their own need to readjust asset allocation. With little room for cheer in alternate assets, equity should easily be the best performer in the year ahead. If global sentiment tumbles and creates volatility in Indian markets, it will be a much needed opportunity for investors to hike their equity allocations.