Look Forward and Reap the Rewards
The Indian markets’ performance has been so impressive that investors have forgotten what a market correction looks like, forget talking about a market crash. On an YTD basis, the BSE Sensex is up by about 30 per cent while NASDAQ is up by 16.55 per cent and Dow Jones Industrial Average has gained by 15.20 per cent. Barring Vietnam, which is up by over 40 per cent, our markets are amongst the major gainers. As such, the million dollar question that has been crossing everyone’s mind is whether the outperformance will continue and if so, how long can this last?
The momentum clearly is with the bulls aided by quality results so far both in the domestic and US’ markets. Owing to a relatively low base, the earnings do not appear to be a problem while the interest rate hike and high inflation have also got factored in. Things appear too good to be true and we also know that the markets cannot be going one way all the time. It’s a matter of time when the stretched valuations are going to trigger correction. Intermittent corrections are healthy for the markets and would provide investors with an opportunity to buy on dips.
Investing at all-time high scares everyone. Yet, the problem of taking money off the table in equity markets is that re-entry into the markets may not always be timed well and the opportunity lost by not re-entering the markets on time could be higher than the cost of holding on to the equities. However, one cannot sit with this dilemma but need to identify opportunities here. So, as stated in my earlier editorials, remain invested in stocks belonging to your core portfolio, continue to book profit and exit stocks in your satellite portfolio.
With the cash generated, work towards reshuffling the portfolio by moving towards highquality high-dividend yielding stocks, especially large-caps. Explore market-beating opportunities and allocate the capital across sectors where the probability of winning is quite high. Our cover story explains in detail the nitty-gritty of ‘investing at all-time highs’. It takes an overview of where to look and which areas sound more promising in the current market environment and where to allocate capital in the current market situation.
In one of our special stories we have analysed the impact of crude oil prices on the equity markets. One must not ignore the rise in crude oil prices as it has the potential to trigger a market correction. Our special story will come handy while studying the impact of crude oil price rise on the equity markets. In this issue, our special feature covers the textile sector in detail and explains the triggers that are positively impacting the fortunes of the sector. Clearly enough, the textile sector is one of the most happening sectors and getting rerated. Do share your feedback on the sector with us.
Talking about sectors, the IT sector is clearly taking a lead when it comes to earnings’ growth. So far, except TCS, almost all the IT companies have beaten the earnings’ estimate (Q2FY22) be it Mindtree, Infosys, Wipro, Larsen and Toubro Infotech, Cyient, etc. When you see such kind of stellar performance in earnings amidst a bull run in the markets, the stocks tend to adjust rapidly at times, achieving the yearly targets in a matter of weeks. This leads us to believe that the market or the stock is overheated.
However, the market is simply looking forward and discounting the strong management guidance, thus pushing the stock prices higher. The IT bull run could be here to stay for few more years even as the healthy guidance and weak rupee helps the IT sector keep the positive momentum intact in the short run. Continue to stay tuned here to India’s favourite stock market magazine as we bring you the latest insightful updates, including the call to actions in a lucid and focused manner. Happy investing!
RAJESH V PADODE
Managing Director & Editor