The arrival of the Modi government at the Centre marked a revival of investor sentiment. The recent correction in the Indian stock markets notwithstanding, the last one year has been quite rewarding for investors. For instance, the benchmark BSE-Sensex is up about 21% since last year. The trend in the broader markets has been even better, with many stocks in the S&P BSE Midcap and S&P BSE Smallcap space delivering handsome returns.
It is only in recent months that the markets have shown some fatigue and have been in correction mode. foreign institutional investors (FIIs), who were pumping up their India portfolio, appear to be on jittery feet at the moment.
As per an article in the Economic Times, there seems to be some rotation of capital out of India into some other emerging markets. Did you know that the Chinese stock markets have doubled over the last one year? That too, despite fears of a slowdown...
This has really caught the attention of FIIs. And some of the so-called 'smart money' appears to be diverting to China to pick a slice of the fast moving markets.
Does it mean that the bull rally in India has come to a premature end? Should Indian investors worry about where the FIIs are headed?
In our view, the ongoing market correction must not be seen as a bull rally gone awry. Market corrections are part and parcel of any bull rallies. Such market corrections can, in fact, throw up solid investment opportunities for investors who have a long term horizon.
So don't worry where the markets will go tomorrow or the next week... Or what will happen when the US releases the next set of economic data... Or what the RBI will do in its next policy meeting...