Market Correction is a Sign of Progress
Of late, the markets have been displaying signs of nervousness – something that was quite expected. The Sensex is down by 1,500 points since August 28, 2020 and investors are already worried whether it is a normal market correction or something bigger (negative) may emerge out of the woodwork of the market. Yet again, we are proud to state that we did warn investors sufficiently in our previous issue cover story, i.e. Vol. 35, Issue No. 20 about ‘Booking Profits’.
Nonetheless, market corrections are actually the best friends of long-term investors. At times I wonder why people fear market correction. Anyone who is looking to park money with a long-time horizon should be excited about the falling stock prices as it creates a fantastic buying opportunity. Believe it or not, valuation matters in equity markets. The market will always respect valuations in the long run. The cooling-off in technology stocks in the US is a great sign of markets being rational and that is a huge relief; else, the northward journey would have taken us into a bubble zone. The pain that follows a crash from a bubble build-up is harsh and scars everyone.
Goldman Sachs has suggested that the GDP may contract by close to 15 per cent unlike the previously expected 10 per cent contraction. Yes, the GDP data is worrying. However, as an equity investor, do understand that the markets are always forward looking and promptly discount such information. One definite positive outcome of this discouraging GDP data can be that we can expect more from the government in terms of incentives and packages. The RBI also will have to do more or at least keep the interest rates low for much longer.
The current market condition has prompted us to dig deeper into the infrastructure space. This is one sector where the Government of India is extremely ambitious and has shown willingness to invest its monies. Also, this sector helps create much-needed employment opportunities, especially in a crisis situation like the present time. Our cover story on infrastructure highlights all the aspects that an investor would want to know to make an investment decision. The kind of money that is outlaid for investing by the government in infrastructure is humongous.
Our other special story on consumer durables talks about how the stocks in the sector that are gaining market share can be a great addition to a portfolio. Option trading is great, but only when one adopts the right option trading strategy. In our second special story, we have discussed the most popular option trading strategies and why it is important to stick with them. Going ahead, if things get choppy in markets – do not panic. Rotate sectors, looking at the trends. It is the success mantra for active investors. And if you have booked profit as advised earlier, you would have generated some cash. The ongoing market correction will create great investing opportunities and the only advice to investors at this point of time is to ready yourself to pick quality stocks for the long term and stay safe!
RAJESH V PADODE
Managing Director & Editor