Indias Relative Underperformance A Short Term Phenomenon!
Just as things were looking good for equity markets, we have an escalated issue with our irritating neighbours impacting the market moods. If you note, India has underperformed heavily so far on a YTD basis. Nasdaq, Dow Jones Industrial Average, Hang Seng, Nikkie, Shanghai and CAC 40 are all up by more than 10 per cent on a YTD basis, even as Sensex is marginally down by 0.11 per cent. I definitely do not belong to that camp which believes that this underperformance is going to continue too long. Two things should happen to reduce the gap between the performance of India and these countries. Either the global markets correct and Sensex stays flat, or the global markets remain flat for the rest of the year and the Sensex does the catch up. I think the Sensex will do the catching up as I see no reason for the global markets to correct sharply. I believe markets are not in a mood to move sharply in either direction, yet.
The earnings season has done no major damage to the investors’ confidence, but at the same time, it has not done enough to cheer them up. We have discussed earnings at length in our cover story in this issue. Across the board, the stress on profitability is visible. The sales have grown, but the profits have not grown in tandem. Do go through our observations and let us know if we have simplified enough the Q3FY19 results for you.
The Nifty PE levels and the expected market returns are always considered before taking investment decisions. In one of our special stories in this issue, we have delved deeper into how the market has performed at various P/E levels. The story is very interesting and we are sharing with you all our insights in this special story. Do share your feedback on the story.
The prospects of the retail sector and the increasing consumption in India are intertwined. We thought it is an opportune time to share our views on the sector that promises so much and contributes actively to the Indian growth story. Indeed, no growth investor can ignore the prospects of investing in a sector that is expected to clock growth of 20 per cent CAGR in the coming years.
Right now, investors need not get into action mode and take any hasty decision. It is time to rethink the investment strategy and identify the broader theme that may be at play currently. The portfolio strategy has to be accommodative of stocks that have posted excellent results in Q3FY19 and promise to repeat the performance in the coming quarters. Banks did well this quarter, so did certain specialty chemicals stocks. You may not get a better time and opportunity than this to restructure your portfolio. Also, use this time to identify quality stocks with scalable business models and are operational in those industries which promise to show decent growth.