May 18, 2006|
Markets: Opportunity in disguise!
If you have been waiting on the sidelines to invest in the stock market, then, this is the time to start allocating your money towards equities. But again, it is pertinent to stick to one's risk-return profile and also take a staggered approach to investing in stocks. Over the next two to three years, we believe that equities can deliver 15% to 20% return per annum. Here is our take on the stock market and the way forward.
First of all, we are not great experts in predicting the level for the index. We also do not predict commodity prices, both of which are not only governed by global demand-supply equation but also investor sentiment. We leave the prediction game to the 'experts' and with this as the background, here is what we think investors should do.
Top losers - Last one week
A rewind…Top gainers - Last one week
The decline in the Indian stock market and for that matter, the stock markets globally, is commonly attributed to the Federal Reserve's stand on interest rates in the US. While it is difficult to predict when the Fed will stop hiking interest rates (in fact, some economist are very critical of the Federal Reserve's policy to hike interest rates gradually), we have been firm believers of the fact that it will have an adverse impact on FII inflows into India. And it has, after a long time (after 22 months, started in June 2004). In the recent Fed meeting on May 10th, 2006, the committee highlighted the fact that further policy firming is possible to address inflation risks. The Fed has already raised interest rates 16 times, each time by a quarter of percent. What is impacting global markets is the fact that a further rise in Fed funds rates (in light of the recent inflation data) could impair the pace of global growth, consequently impacting commodity demand. Thus, the downward effect in commodity prices and stocks. Some have even attributed to the recent decline in commodity prices to the selling by hedge funds and not necessarily to a sudden change in the demand-supply equation for commodities.
Take a Pause…
In these volatile, it is pertinent to take a pause and reflect on the fundamentals.
First of all, this is not a 'bear' market. It is a correction, which is healthy. However, the extent of volatility and the magnitude of fall in such a short span is not something investors would have anticipated.
The correction does not change the fact that, even now, there are promising investment stories from a long-term perspective. Yes, given the fact that interest rates have risen (both in India and globally), debt is also becoming attractive. In the case of debt, however, we suggest investors to invest in short-term fixed deposits or floating rate funds (to know more about investing in mutual funds, log on to www.personalfn.com).
Benjamin Graham once said, '...in the short term, the market is a 'voting' machine whereon countless individuals register choices that are product partly of reason and partly of emotion (consensus). However, in the long-term, the market is a 'weighing' machine on which the value of each issue (business) is recorded by an exact and impersonal mechanism (fundamentals).'
Despite the current volatility, we maintain our stand on the recommendations we have given out through our 'Stock Select' (login | sign up)and 'Midcap Select' (login | sign up) products. In case you bought the stock based on our recommendation, hold on to it from a long-term perspective. In case you have a surplus, we suggest you start allocating money towards equities in a staggered manner.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
Aug 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Aug 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407