2014 was a historic year for the Indian markets. The Indian stock markets had given big thumbs up to the Modi government. And there was a good amount of feel good factor prevailing around. India growth story was back in focus. But after the excitement, here comes the scare.
The benchmark BSE-Sensex is back hovering around 26,500 levels after touching 30k mark. The recent spate of correction does highlight some crucial points. The reason why investors were gung-ho about the Modi government is because of its emphasis on growth and development. Thus, there were huge expectations from the new government to deliver big time. However, the earnings of several big companies did not meet up to the expectations. Further, more recently the market fears lower rainfall which can put inflationary pressures on the country. Over and above, the FII activity which is as a result of global macro factors too influences the market movement.
While there are no doubts that given the kind of challenges the Indian economy is facing, there will be several tumbling blocks. The current government has taken some important decisions and has been working over towards the same. This indeed can bring difference in the fortunes of the Indian economy. However, investors need to temper their expectations because these reforms cannot be implemented overnight and will take some time for the change to happen.
Rather than getting carried away by the short term blips, one needs to be disciplined in its stock picking approach. Instead of focusing on stock prices and predicting their movements, investors should focus on finding value. One can reap strong returns provided they stick to investing in those companies that have robust business models and are available at attractive valuations. The bottomline is that any decision to buy or sell should be a function of fundamentals and valuations and not short term events.