Is This the Best Time to Buy Stocks?

The Stock Market Context You Need to Know

Before the war began, the Indian stock market was seriously testing the nerves and temperament of retail investors.

While most midcaps and smallcaps in your portfolio had fallen, the benchmark indices were flat.

Since late 2024, corrections in the Nifty have been negligible and up moves have been met with what is known as 'overhead supply'. This is a technical term to describe investors selling stocks they bought at higher prices as soon as those prices return.

In other words, there has been no trend (either up or down) in the Indian stock market for the last one and a half years.

The war in the Middle East may change that scenario, but here's the important thing to understand...

This is 'normal' market behaviour.

Yes, normal.

Here's a long-term chart of the Nifty to prove it. Just look at all the flat periods, when the red line is mostly horizontal, not moving up or down. Those periods are measured in many months, even years.

The Nifty was flat for more than 6 years between late 2007 and early 2014, with one bear market and a full recovery in between.

Nifty Long Term Chart

Here's a table depicting the crises of the past and the Indian stock market's reaction to them.

Past Crises and Market Reaction

A Solution for Investors

Frustration at the market is not the solution. Good stock picking is.

At the end of the day, we should be stock pickers. We can leave the trend following, futures and options trading, macro trading, statistical trading, etc, to the experts.

The humble retail investor - that's you - can create wealth by just sticking to the fundamentals of investing and avoiding the 'noise' of the stock market.

We are not saying this is easy. In fact, the opposite is true.

It's easy to get distracted by the next hot stock/sector, give in to FOMO, get tempted by tips offered friends/family, and a number of other things (geopolitics, interest rates, etc).

But the secret of retail investors who quietly beat the big institutions is found in the following:

• Equanimity: Win or lose, they don't let emotions dictate their decisions.

• Circle of competence: They focus on investing in what they can understand.

• Margin of safety: They never overpay for a stock no matter what the 'story' may be.

• Specific knowledge: They put in the effort to understand a business/sector.

• Decisive action at the right price: They buy during 'panic' and sell during 'euphoria'.

• Patience: The have their watchlists ready and are willing to wait for the right price.

As simple as these points may seem... this is all you need to do right now.

Conclusion: The Next Bull Market Will Reward Investors

In times of war, it may seem strange to talk about a bull market... but history tells us this is the right time to think about buying stocks.

As the old saying goes, 'Bull markets climb a wall of worry'.

You see, the last bull market never really ended back in late 2024 because the corrections since then have been few and far between. Thus, the new bull market - when it starts - will essentially be a continuation of the old one.

After all, the ongoing war along with its fallout, could bring down stock prices of fundamentally strong companies, to reasonable levels.

As and when fundamentally strong stocks in your watchlist begin to trade at reasonable valuations, you can consider buying them.

If you have already bought high quality stocks at reasonable valuations and are just sitting patiently, then you are doing the right thing in this market.

Also, if you have spare cash, there is no need to feel any pressure to buy. You can take your time to do your due diligence and buy at the right price.

Finally, if you have any fundamentally poor quality stocks in your portfolio, consider selling them. You can deploy the cash in other stocks. Your portfolio's long term health will improve significantly.

Happy investing.