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Investing amidst rising global conflicts

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The Russian invasion of Ukraine in February 2023 stalled global supply chains and increased energy prices. It continues to hurt the global economy directly and indirectly. As it settles to the long-term nature of that conflict, the dramatic events in Israel and the Gaza Strip have pushed up energy prices. In such a situation, most of you would focus on safety first and invest in the least affected assets. Gold is already finding favour among global investors. There is generally a flight to safety in world markets.

Share prices fell on the first trading day after the conflict started. However, they bounced back and gained ground over the past two days. Shares and bonds rallied in wealthy countries in comparison to developing ones.

As the world grappled with the aftermath of COVID-19 and the Russia-Ukraine conflict, the World Bank and the International Monetary Fund held their annual meeting in Morocco. The leaders of the two most significant multilateral lending institutions quickly called for a de-escalation in the region. The IMF published its latest global economic outlook and expressed optimism despite the gloom. “The global economy is limping along, not sprinting,” an IMF official told the press.

The fallout of conflict-triggered problems is that interest rates go up. Factors like oil prices, inflation, and global supply chain management again become issues of contention. In a situation of uncertainty, your portfolio needs a review.

Investing in an international basket of stocks could come with some challenges as the real estate crisis deepens in China, the US faces labour market tightness, and interest rates remain firm. India, on the other hand, offers an opportunity for growth despite a run-up in share prices. The latest Purchase Managers Index or PMI data shows a robust expansion. At the same time, consumer price inflation was the lowest in many months at just over 5%. That is good news for businesses as the economy is expected to be on a growth trajectory.

At a time when commodity prices could be at risk of inflation, you may want to look for companies that depend on India’s consumption story or in the export-oriented sectors. Software services companies in India have disappointed the street with their latest quarterly financials. TCS, the largest software services exporter, announced better-than-expected profit margins and a buyback of shares. Infosys, the second largest software services exporter, disappointed the street with expectations of financial results. The company is not hiring new employees. Collectively, top IT firms in India are hiring fewer people than last year. Technology shares are witnessing a correction.

With consumer confidence high amidst the festive season, domestic consumption could see a boost in urban India. That should benefit businesses in the consumer goods and white goods companies. The government will likely finish the planned capital expenditure for 2023-24 ahead of the general elections. That should help businesses in the infrastructure and construction space.

You can identify the right companies through research or use technology to choose a basket.

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