Euphoria Is Welcome, But Play Safe!
As of now, the markets are zooming ahead and touching new heights. This does not come as a surprise to us given the fact that we had predicted several months ago about how the Sensex would get close to 41,500. However, the point to be cautious about is that all this movement is primarily on account of the solid expectations from the upcoming budget.
There is no doubt that the budget will be investor-friendly. This is evident from the positive body language and comments emanating from Finance Minister Nirmala Sitharaman. And, as always, the positive buzz in the market is pushing the markets to become overly optimistic – the ‘celebratory’ scenario reflects it clearly. Hence, it will be a good strategy to use this euphoric phase to do book some partial profit booking before the budget. Post the budget we believe there will be more opportunities to re-enter the stocks.
Further, I would like to emphasize the humungous growth opportunity brewing in the banking sector considering a 2-3 years’ investment horizon. This has been further reinforced by the recent announcement that the RBI is working on an ambitious project that integrates privacy protection with credit reporting. This will give consumers access to one’s financial transactions and data in an authentic and approved manner which can then be shared with others as desired. This simplicity will bring in sheer volume of credit lending to smaller companies and individuals who are currently not able to prove their credit worthiness via a trustworthy source. It will help them to demonstrate their cash flow and various transactions to build trust with a potential lender. This will allow lenders to aggressively but safely and securely provide the required funding. With more than 60 crore people connected on the internet, this facility will suddenly open a huge market for the banking and lending industry. Hence, do stay tuned for further developments on this front.
In this intensely competitive world it is fairly presumed that the gap between the top enterprises is low and it’s just a matter of time when one topples the other. However, there are some companies that have created a gap or should we say a ‘moat’ that is meant for preventing other companies to catch up. Our cover story this time delves on such moat companies and provides our readers an insight along with probable opportunities.
Our special story talks about the market shocks and its impact. You might be surprised to discover how quickly and how frequently the markets have recovered after shocks. Equity as an asset class almost always outperforms whenever shocks hit the markets. Do let us know your feedback on the story and tell us how you intend to use the observations shared in the story. In our other special story, we talk about return on invested capital (ROIC) as an important profitability measure to be tracked while evaluating investment opportunities. ROIC is important because it focuses on the operation performances of a firm and much more. Read this special story as it might help you identify quality stocks.
The market mood is buoyant. Enjoy the present pre-budget rally while being cautious about it getting overboard.
RAJESH V PADODE
Managing Director & Editor