Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
When will the buying opportunity come? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 23, 2010

    When will the buying opportunity come?

    Indian investors have to contend with two conflicting set of facts right now. Let us take them one by one. First is the bailout package that the leaders of the developed world used after the global financial meltdown. Basically, the governments had to pitch in their own credit to bailout parties whose credit became unacceptable. This influx of credit was like a massive dose of medicine to rescue a patient who was slipping away. But such a strong medicine will have side-effects. And the financial side effect of the massive bail out programs is the rapid rise of prices across asset classes. Be it stock markets, real estate or gold. When such a deluge of money starts chasing assets, prices go up.

    But here's the catch, the bailout packages can only be a short term measure. In the long term, the developed nations will have to do the opposite of flooding the economy with money. They will have to drain it and bring about structural changes. Simple but difficult changes like living within one's means and not on one's credit card. Such measures will begin sooner rather than latter. Simply because the medicine - government credit - itself seems to be losing its efficacy. As noted investor George Soros points out in a recent speech, that is exactly what the recent European subprime crisis indicates.

    If a large influx of money can cause prices to rise across asset classes, surely the opposite is also going to be true. As and when governments in the West decide to roll back the deluge of money, prices will contract. The breathtaking rally soon after the stock markets collapsed came as a pleasant surprise for investors. We believe, the draining out of the bailout packages will bring about the opposite reaction.

    The underlying fundamentals

    Now, on to the second set of facts, which are particularly relevant to Indian investors. No matter whether stock markets collapse, rally back or collapse again, the underlying fundamentals remain intact. That of the India growth story. A huge nation of eager consumers and producers will keep economic activity buzzing. There are too many economic problems to solve. More roads, power, housing, education, healthcare, better lifestyle, so on and so forth. And the solution to each of the problems will result in economic activity. As agents of economic activity, companies will create wealth. Investors who have stock holdings in such companies will benefit. Unless of course, India tragically decides to stick to its past ways and curb the aspirations of a billion plus people. By all indications that is not going to happen.


    To sum up, there is a very strong underlying reason why investors should own well-managed sound Indian companies. That doesn't change because the developed nations' credit machinery is broken, mended or broken again. But the price at which excellent Indian companies are available is a function of the cues emanating from the West. Our advice to Indian investors is to act decisively when the prices are right.



    Equitymaster requests your view! Post a comment on "When will the buying opportunity come?". Click here!

    3 Responses to "When will the buying opportunity come?"

    preet sagar

    Jul 7, 2010

    i really appreciate fare comments and are very useful to arrive at decision. my suggestion is whenever a good share jumps up/down more than 10%, if reasons therefor come from equitymaster same or next day, the viewers would love the most the equistymaster



    Jul 1, 2010

    It is thoughtful & well analysed in all angles and very useful to the beginners who are in the capital market. In fact the article is trimming the mindset of the investors.


    Ujjwal Mukherjee

    Jun 24, 2010

    A brief but very apt and excellent article. I like and appreciate what the folks in Equitymaster are trying to do and that is educating the investors about the ‘right’ way of investing. Kudos to them !!

    Equitymaster requests your view! Post a comment on "When will the buying opportunity come?". Click here!

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 11:15 AM