X

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.
What do the markets hold for investors? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 24, 2000

    What do the markets hold for investors?

    With the kind of fickleness that domestic markets have shown in recent times, making a near term call on the market is next to impossible. However, for long-term investors, the markets are once again presenting an investment opportunity.

    Before we delve into the long terms aspect, let's take a look at what have been the underlying factors that caused this bearish phase in the markets. First ofcourse is the drought. With over 60% of the Indian population living in rural areas, a decline in agricultural output has a significant impact on domestic consumption activity. This is already evident in the sluggish growth in sales of consumer products. Next to hit the market sentiment was the floods in the East, which once again impacted consumption activity, apart from, once again, impacting agricultural output.

    Second, is the slowdown in industrial activity. This has been triggered by sluggish growth in consumption, which in turn has contributed to the dull investment climate. Overall, the industrial sector has been hit by both slower consumption and sluggish investment activity.

    Another factor responsible for contributing to the industrial slowdown and also to the change of sentiment on the bourses has been higher crude prices. This has created a situation where inflation is rising and so is the deficit in the oil pool account. The oil pool deficit has significant implications for the fiscal position of the government.

    The three developments stated above have been largely responsible for the sell off in the markets (apart, ofcourse, from the fact that few companies have announced lower than anticipated earnings in the second quarter). In such a scenario, where does our enthusiasm stem from?

    Well, despite the slowdown in the Indian economy, we are still likely to post a GDP growth rate of 6%. This is in line with our average growth rate recorded over the last few years. Also, the ills mentioned above are hardly fundamental to the economy. They are not the result of bad policy decisions, but natural developments. Taking a call on agricultural output in the coming year would be like betting on or against a normal monsoon. Ditto for crude oil prices. The slowdown in consumption activity that has hit domestic demand is more temporary than permanent (unless ofcourse someone believes that monsoon will fail year after year).

    Over the long term, the impact of sub normal monsoons or a spike in oil prices will seem no more than a blip on a chart plotting the stock market indices. What would matter are the long-term fundamentals of the economy/industry/company. And these remain firmly in place. Infact, with the reform process moving on (albeit slowly), the Indian economy is likely to become more vibrant in coming years. For long term investors the markets have once again presented an opportunity to enter into stocks that have been hit more by sentiment than fundamentals. And as history has shown, mis-pricing in the markets is always corrected.

     

     

    Equitymaster requests your view! Post a comment on "What do the markets hold for investors?". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    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

    S&P BSE SENSEX


    Aug 18, 2017 (Close)

    MARKET STATS