Free Report: Multibagger Stock Ideas 2020

Why the Declining GDP Growth is a Strong Indicator to Buy Stocks

Dec 4, 2019

Tanushree Banerjee, Editor, The 5 Minute Wrapup

How do you plan your vacations, dear reader?

This is how I do it...

I start with my budget. I search online for the best places to visit within my budget.

I finalise my location. Then I check the best time to visit that place.

Now I know where to go and when to go.

The next step is to book the flight and hotel tickets.

Simple, right?

But what if, suddenly, the charges for both the hotel and the flight tickets are much higher than you expect?

What will you do?

A simple hack might help. Never search for the best time to go to a place if you want to save costs.

In fact, do the opposite. Try visiting during an off-season. You'll save on hotel and flight costs. You'll also save yourself from huge crowds that come during the peak season.

I believe, this is something which we should all follow in the investing world as well.

Invest in the market's 'off-season' i.e. when the macros are bad.

This is when rating agencies and mainstream media are painting a gloomy scenario of the Indian economy.

And then there's the biggest indicator of all: Falling Gross Domestic Product (GDP) growth.

The second quarter numbers have come in for FY19-20. GDP growth rate fell to 4.5%, the lowest growth rate recorded in the last six years.

The January-March quarter of 2013 saw a GDP growth of just 4.3%. The Indian story was written off then as well.

But what really happened?

The Indian stock market just took off for the next 4-5 years.

GDP Growth rate (2002-03) - 3.9% GDP Growth rate (2008-09) - 3.1% GDP Growth rate (2012-13) - 4.5%
Next 5-Year Stock Return (Apr 2003 - Mar 2008) Next 5-Year Stock Return (Apr 2009 - Mar 2014) Next 5-Year Stock Return (Apr 2013 - Mar 2018)
BSE Sensex 408% 126% 75%
BSE Midcap 615% 135% 157%
BSE Smallcap 840% 112% 186%
Source: BSE

--- Advertisement ---
From X to 2X: How to Double Your Income in the Long Run

How would you like to potentially double your income...

– Without working longer hours
– Without asking your boss for a raise
– And without even cutting expenses

What if we said this was achievable...over the long run?

Our Co-Head of Research, Rahul Shah, recently shared his latest strategy with a small group of readers...it is a way to potentially double one's income in the long run.

Rahul has put down a note explaining, step by step, how this strategy works, how it beats conventional investments, and how readers like you can use it to potentially generate an additional source of income.

Click here to read Rahul's detailed note on his strategy.
------------------------------

We saw a similar trend in 2002 (3.8% GDP growth) and 2008 (3.9% GDP growth) as well. Low GDP growth followed by a multi-year bull runs.

This takes care of the 'when to buy' part. But what should you buy?

Like your vacation, if you choose a bad place to visit, you won't enjoy yourself, if you go in either the peak or off-season.

Similarly, in the stock market, if you choose a wrong business, it won't matter when you buy. You will ultimately lose money.

Look at businesses that are in the best position to revive when the Indian economy revives.

These are the businesses that will ride the India growth story. They have seen many cycles of low GDP growth. They have comeback stronger, while their competitors failed during tough times.

Most importantly, these are businesses that will be a part of future megatrends.

If your stocks have these characteristics, you have a potential winner on your hands. You just need to be patient and wait for the tide to turn. And history has shown us, it always does.

This is the central thesis of my Rebirth of India project. I have identified 7 stocks which have all these characteristics.

When the Indian economy revives, I strongly believe these stocks will do well.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, The 5 Minute WrapUp
Equitymaster Agora Research Private Limited (Research Analyst)

PS: To read more about my top 7 stock picks for 2020 and beyond please click here.

Recent Articles

This Man Is Worried, So He Just Started Buying Stocks January 29, 2020
He had pledged never to touch stocks in his life but now...
50% Profit in 18 Months: More Rebirth of India Gains Coming Soon January 28, 2020
The gains in Mahanagar Gas is just the beginning of more upside to come in many other stocks.
The #1 Secret to Winning Big When Stocks Are Rebounding January 27, 2020
Caution: It may require you to bear some pain...
Vijay Bhambwani on How to Trade for Instant Income January 24, 2020
Why options writing is so profitable?

Equitymaster requests your view! Post a comment on "Why the Declining GDP Growth is a Strong Indicator to Buy Stocks". Click here!

1 Responses to "Why the Declining GDP Growth is a Strong Indicator to Buy Stocks"

Capt.C.J.Bhide.

Dec 4, 2019

really apt & hence very convincing argument!!!!!!!!!!

Like 
  
Equitymaster requests your view! Post a comment on "Why the Declining GDP Growth is a Strong Indicator to Buy Stocks". Click here!