The Indian stock markets caved in yet again yesterday. What seemed like a dream bull-run until some months ago appears to have been suddenly taken hostage by the market bears.
Is this the time to get anxious about falling stock prices? Is this time to dump stocks?
In our view, the ongoing market correction could be a wonderful opportunity to buy solid businesses for the long term. There are indeed reasons to be optimistic about the Indian economy.
In fact, as per an article in Livemint, rating agency Moody's Investors Service has pointed out some green shoots in the Indian economy. Here are some key highlights...
The RBI has lowered the benchmark lending rates by 50 basis points in 2015. This is set to lower borrowing costs for the corporates. At the same time, it may also revive consumer demand for domestic-focused industries.
The rating agency credited the new government for initiating some recent policy changes such as allowing state-run fuel retailers to set diesel prices, lifting the ban on mining and passing legislation. These initiatives are likely to have a positive impact on Indian companies.
The downturn in global commodity prices is set to have a positive impact on Indian companies in the form of lower operating costs. The sectors that are likely to be key beneficiaries include automotive, manufacturing, infrastructure and power.
On the back of lower interest rates, lower inflation, policy changes by the government, etc. the Indian economy is expected to recover over the next 12 to 18 months. And the recovery, in turn, would help improve the credit rating of Indian companies. As such, pro-cyclical sectors such as industrials, automotive, transport infrastructure and metals are expected to benefit from this change in economic landscape.
Our message to investors is this... Don't let interim price fluctuations force you to change your investing strategy. Take every fall as an opportunity to accumulate good businesses at bargain prices.