Make Hay while the Sun Shines

Taking an overview of the most current development in the markets, the FPI inflows are pushing the stock prices higher. Dow Jones has had one of the best months in November since 1987 as the benchmark index soared up by 11.8 per cent. Back home we have never had a better November for markets in more than the past 25 years! It has been a ‘wow’ performance, the likes of which inspires investors to be in the equity market. Nonetheless, it is no time to bask on past glory and we need to look at what lies ahead for the markets. After a stellar rally it is normal to have a slight pause or a consolidation in the markets.

To us it is a clear ‘buy on dips’ markets. Any correction should be used to accumulate your portfolio stocks. The reported progress on the vaccine front will ensure that the world economy normalises and that is a huge trigger for the markets. Investors should not underestimate the power of liquidity that has been unleashed in the economy by various countries. Historically, we have seen liquidity push stock prices into a bubble zone. Though this will happen sooner or later, the current situation may not be worrisome, though I must admit that caution would be the wise mantra as the valuations are no longer cheap. 

It is a stock-pickers’ market. Though the PE ratios are becoming unreasonably high as the earnings are yet to catch up, the opportunity lies in riding the wave infused by the foreign money coming in. Timely exiting this wave will also be as important to lock your gains. One of the reasons why we believe the markets will do well going ahead is the catch-up potential of the cyclical stocks. A majority of cyclical stocks are still underperforming the markets and a sizeable bunch of such stocks are still trading below their pre-pandemic prices. To emphasize on this very observation we have detailed our view in the cover story on ‘cyclical stocks’. 

The story also defines what exactly cyclical stocks are and why we believe they will outperform. The current issue also features our annual special ‘Mid-Cap Edition’ that not only provides a birds-eye view of the mid-cap segment but also lists mid-cap stocks based on a unique methodology. Do let us know your feedback on the same. Meanwhile, the realty sector is also looking hopeful. We have taken the opportunity of analysing the same in one of our special stories. 

Overall, the market is bullish, and sentiment remains positive, warranting a bullish stance in the market. However, it is easy to overlook the basics of investing when the market is bullish. We advise you not to do that. Keep in mind that the opportunity is to just ride the wave while the FIIs are pumping in funds. In the long term it is finally the earnings that will hold and drive the markets.

RAJESH V PADODE
Managing Director & Editor