Hunt for Value in this Heated Market!
Post the profit-booking that took place on December 21, 2020 when the markets fell 3 per cent, the markets do not appear to be in any abating mood as new highs are literally being made every trading session. And given this momentum, it is quite easy to get carried away. An increasing number of stocks have been participating in the market rally. Such is the power of liquidity that it has pushed the Japanese Nikkei 225 to levels it has never seen since the early 1990s.
Nonetheless, it is time to remind oneself of the adage that when people are greedy it is wise to be fearful. Investors need to recognise that this is a liquidity-driven rally fuelled by optimism on the vaccine front and on the hope of economic recovery. The Brexit trade deal has definitely added to the bullish sentiment and a weaker dollar is not helping the bears either. It is the confluence of all the positives that is driving the current market rally.
In my view, the real unsung hero of 2020 has been the Reserve Bank of India (RBI). The timely market-supportive action and the boldness of the RBI was the hallmark of current leadership at the central bank. After the RBI’s bold decisions to support the economy, all eyes will now be on the fiscal policies and the various innovative steps that the government can take to push the economy back on a growth trajectory.
While there is speculation on what will happen to markets in 2021 and which stocks will outperform in the coming months, we have chosen to highlight in our current cover story our view on what investors need to do in 2021 to outperform the markets. We believe value stocks will make a comeback and there already are visible signs of that in the markets. Do go through the cover story thoroughly and do share your views.
PSU stocks are in the limelight after trading at decadal lows. We have covered in detail the prospects for PSU stocks in one of the special stories and have shared our outlook on PSU stocks. Yes, 2021 may belong to PSU stocks but not all PSU stocks are expected to deliver strong performance. A handful of them may surprise on the upside.
The year 2020 was an extremely unusual year in many senses. It was also a year that saw several companies going through a turnaround. In our other special story, we have highlighted the performance of such turnaround companies while also highlighting how best to identify such turnaround stocks at the right time. We hope you find this report interesting.
Going ahead, it will be earnings, budget expectations, global markets, USD dollar movement, FPI flows and the RBI stance that will determine the market moods. It looks like we are set for a highly volatile entry into 2021 with lots of optimism and hope and very thin margin for error. It is always better to remain cautious when a liquidity-driven market keeps pushing markets to record highs. Do not leverage and overtrade. Remain diversified and do not let greed take control of you.
RAJESH V PADODE
Managing Director & Editor
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