The markets bumpy ride got aggravated in the last week post the mayhem related to the scam-infected PSU’s started getting unfolded. After the streak of losses to the tune of ~3% in the last week, Sensex extended gains by up to ~600 points as the IT and banking stocks bloomed post the tension cornering around the global trade subsidised. Even with the feeble recovery, many investors fear a market crash in the near future as the markets continue facing pressure by the global uncertainty and the mounting NPAs crisis of the Indian public-sector banks.
However, let’s assume that the markets continue meeting speed-bumpers on account of both domestic and global volatility which may lead to a further market bleeding in the range of 5-10%.
The dwindling value of the stock markets would have been bookmarked as a red flag if the GDP data along with the other leading indicators such as corporate earnings, auto sales would not have charted out in a positive way.
Here are 5 reasons not to panic but enter in value-buying stock deals that are rock solid even when the markets enter the negative territory.
- Better-than-expected GDP numbers: The most recent GDP data for the quarter ended Sept17-Dec17 rose to 7.2% which is up by 0.7% on a QoQ basis. The better than expected results even after the transient negative impact of GST suggests that the economy is in a recovery mode and we can expect the economy headway to mushroom in the coming months.
- Growth across a multitude of sectors: The government is resolute about rejuvenating the stress-ridden banking sector, boosting the social reforms, reviving consumer demand and encouraging public and private investment. The underlying health of our economy remains steadfast owing to the growth across various sectors.
- Boost to the geo-economic of the north-east region: The BJP government’s victory in North East region is no mean feat. The triumph of the BJP in this region will help the country in reinforcing the trade ties with South East Asia.
- Acceleration in the leading indicators: The jump in the aggregate revenue and net profit of 1,078 companies by approx. 13% and 27%, respectively, year-on-year is a sign of a strong pickup in the corporate earnings recovery. This is also reflected in the 10% shoot-up in the Sensex EPS. Gross Fixed Capital formation, key indicator of investment demand, is in the green by up to 12% on account of improving macroeconomic policies. As per the report released by SIAM, there has been an increase in the sale of passenger vehicles by approx. 9.2% in the fiscal year 2017.
- Improving fundamentals of the recommended portfolio: The 9-Monthly result of all the stocks in our universe displayed steady growth in their fundamentals, which strengthens our belief in our investment methodology and the stocks growth potential.
The Way Forward
The market's performance in the coming days shall be largely dependent on how global cues and the performance of the bank scripts shape up in the near future.
As a long-term investor, you should look beyond the short-term hiccups and consider the consolidated picture at the micro and macro level which are the leading indicators to determine the fate of Indian stock market.
- The robust growth in manufacturing and amplification in the construction sector with a revival in stalled projects can mark a turnaround in the country’s economic growth momentum.
- India has been able to stand tall even with the spill-over effects of demonetization, GST and weak FII inflows. The improved corporate health along with the robust GDP data are the visible green shoots that the Indian economy is speedily heading towards emerging as the fastest growing economy.
- This in itself, is a great opportunity to enter the markets at a low level by investing in long-term business opportunities which have the potential to grow 5x, 10x, 30x or even more in the next 7-8 years. The economy’s long-term growth story is not yet over! In fact, this is the outset of the journey towards a greener path.
India’s Growth Story Is Steadfast. But Is Your Portfolio?
There is one stock market etiquette which every investor should follow: "It's not about the right time, but about the right stocks while investing in the stock markets.”
So as your financial advisor, if you ask us the right time to invest, we would say 'NOW' albeit in the carefully-selected stocks.
After 15+ years of investing experience across various business cycles, we can vouch on our portfolio comprising 15-20 hand-picked robust stocks which have the potential to withstand and even blossom during the rough weather. Click here to build a robust portfolio.