Ups And Downs In Both Cricket And Stock Market

Regardless of these academic studies, there are other similarities between India’s journey in this year’s World Cup and the performance of the stock market. The Indian cricket team kept on winning their matches without much resistance, and after winning all their six league matches - and beating Bangladesh in their World Cup quarter-final - stormed into the semi-finals. Nonetheless, they met their nemesis Australia in this round and were knocked out of the tournament, thereby dashing the aspiration of more than a billion Indians.

Similar is the story of the Indian equity market, which has witnessed a continuous rise since September 2013 with no major downtrend in between. The reason for such a notable rise was the continuous flow of market-positive political news. First was the announcement of  Narendra Modi as the prime ministerial candidate for the 2014 general elections in the month of September; this was followed by the assembly election victories in Chhattisgarh, Madhya Pradesh and Rajasthan at the end of 2013. The rally roared as the BJP-led NDA won the general elections with a comfortable majority.

The market-friendly announcements made by the government kept on fuelling the rally till the first two months of 2015. Nonetheless, the government’s Achilles heel is its inadequate number in the Upper House, which has stalled the passing of some of the important bills, one of the most important being the Land Acquisition Bill. In 2013 when the bill was first passed by UPA-II government, I had clearly stated in my edit (issue no 21, dated October 6, 2013), in a sarcastic manner that “this is the most efficient use of national exchequer to buy votes by selling false hopes of a richer future to our poor farmers.” I further added that “I am hoping that the next government sees through the potential damage that this bill will cause to our nation and they push for amendments or revocation of the bill.” This is crucial for the government and its inability to get it cleared is sending wrong signals to investors on the government’s ability to carry out reforms. This has been reflected in the wave of selling by the FIIs. Hence the market saw a sharp correction and the large-cap indices fell by more than 8 per cent while the small-cap and mid-cap saw even more of such thrashing.

[PAGE BREAK]

The common lesson that needs to be learnt in both the above cases is that uncertainty is part and parcel of the game, in particular the equity market. Any continuous uptrend in the equity market makes one oblivious of the risk associated with the equity market. Therefore this correction, we believe, is a good reminder to many investors about the volatility of the equity market and the need to manage their return expectation from the market.

Given the fact that the market has had such a bull run in the last one and a half years, there are many sectors that have outperformed the market by a huge margin. Many of us are curious to know more about these sectors and their future so that we can strategize our investments. This time, in our cover story, we have covered one of such sectors - auto ancillary. Our research team has deep-dived into the fundamentals of the sector, its future and presented some top picks for you to dwell on.

Also, in our effort to serve short-term traders, our technical analyst team has done an insightful special report and recommended the top five ‘buy and sell’ choices based purely on technical analyses. I am sure that the Indian cricket team must be reflecting on their defeat at the hands of the Australian team and giving thought about how to strategize better the next time around. Similarly, the recent movement in the market has provided investors an opportunity to mull over their investment strategy and how to benefit from such a correction. We at DSIJ are always there to guide and navigate you through these times to make most of the opportunity.