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The operative word is long-term

Nov 21, 2003

Out of the last six trading sessions during the current month, the indices have lost ground in four and gained in the rest. The fall in the four sessions has been strong indicating a corrective mode on the indices. The biggest question in everyone's mind at this point is likely to be whether this correction is here to stay or have we seen the worst of the same? Our view remains the same, while the bullishness is expected, the pace at which the markets have risen is unwarranted and hence a correction is the order of the day in order to ensure that the rally is sustainable in the long-term.At this point of time we would also advice investors to review their investment objectives in order to ascertain whether they need to stay invested or not. We also advice to tone down the expectations form one's investments. We need to understand that in every bull market, and especially this one, the valuations metrics to a certain extent are neglected and this leads to unrealistic stock process, that in the long term only harm the retail investors. Remember the equity markets inherently carry higher risks that most other asset classes.

While we caution the readers, we would also like to point out that, equities as a long-term investment option works the best. And in this regard the Indian economic growth as well as foreign investor interest in the Indian stock markets may hold promise to the domestic investors. We must also understand that the government has been carrying out various reforms in most of the areas like banking, pensions and power. This is likely to benefit the economy in the long term. Remember the operative word is long- term.

Historically equity investments have performed well only when there has been a long-term horizon in mind. Thus we believe that investors needn't worry about the correction happening in the market as, they will be rewarded in the long-term, provided they invest in companies with a sound business model and a management that is capable to lead the company in an ever evolving Indian economy.


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