Sensex Set To Scale Wall Of Worries - Yet Again !
Sensex, as mentioned earlier in one of my communique, is clearly heading towards 38,000. It may be a volatile ride for the Sensex going forward, but in my view, it will eventually scale the wall of worries as it has done during this year so far. While Sensex is touching record highs and select blue chips are gaining momentum, the mid-caps and small-caps continue to show weakness. Overall, the economy is in good shape and the consumption story is very much intact. IMF has once again projected India to be the fastest growing economy in the world. It augurs well for the equity investors in India – for sure.
I am delighted to share the excitement on the earnings front so far. What a superlative performance by Corporate India! This earnings season you will witness stock prices taking support from the quality of earnings, ignoring the headwinds in the form of trade war rhetoric and the rising interest rate scenario across the globe. Expect some great numbers from NBFCs and auto companies this season.
In this issue, we thought we will address a problem faced by majority of investors regarding underperforming stocks in their portfolios. The cover story attempts to highlight where the underperformance is coming from in the current market scenario, under what circumstances we allow the underperformers to dominate the portfolio returns and how to get rid of underperformers and why it is important to do so. I am sure most of you will be able to take action based on our suggestions outlined in ‘How to deal with underperforming stocks’? Getting rid of underperformers is as important as including winners in your portfolio – take this from me!
Indian currency has weakened and the perception is that the export-oriented stocks do well in such situation. We definitely buy this argument, but we do have something to add to this perception in our special report. Go through our report on export-oriented stocks and let us know if you agree with our observations.
In our other special story, we have commented on the prospects of real estate sector in India. Indian real estate sector is in good shape and savvy investors can remain invested in the sector. Please share your feedback on our report.
On the markets, investors are trying to figure out what is happening with the mid-caps and whether investing in small-caps is a sin. The underperformance in small-caps and mid-caps is seen on a YTD basis, but please remember these stocks had outperformed consistently in the past 3 to 5 years by a huge margin when compared to the large-caps. People invested in the small-caps and mid-caps in 2018, betting on them to outperform large-caps once gain. Going forward, the large-caps are expected to do well in CY18. Keep a balanced portfolio with relatively larger exposure to the large-caps. Eventually, the mid-caps and small-caps should stabilise, but till that time, your portfolio should be skewed towards large-caps.
Stick to the basics and do not experiment too much in this market as the stock prices will move up eventually owing to the improving fundamentals. Remember, at times, the volatility is in our mind. A calm approach with a focus on bottom-up opportunity is the need of the hour.
Happy Investing!