Buy High Conviction Stocks – Now !
The BSE benchmark Sensex is down almost 4 per cent from its recent all-time high of 39,275. Long term investors should see this correction as an opportunity to enter the markets as history has shown that no election results have impacted the markets in the long run. Poor earnings this season, renewed trade war fears and lack of liquidity in the markets have created headwinds for the markets in the short run. Such pessimism should be used smartly to enter markets.
Indian markets have been under performing their global peers by a good margin. It is only a matter of time that Indian markets catch up with the broader global market theme. Global markets are on a song currently primarily due to the goldilocks environment, i.e moderate growth rate in the economy with lower inflation and supportive monetary policy for the equity markets. There is a reasonable chance that China will negotiate a trade deal with the US and an amicable solution is arrived at. A full-blown trade war is not good for the world economy and I believe both the economic superpowers understand that. I see the trade war situation as a temporary blip and the markets will be on the normal track soon.
There is a perception that the consumption is down in India and that is hurting the Indian economy growth negatively. We must understand that it is an election year and things do get slowed down in such an environment. People postpone their consumption. Expect action to be normal post-election. As the markets approach the election results day, a minor blip in the markets may occur. However, the overall environment should be conducive for investment for long term investors. It also means that as an investor you can start accumulating your high conviction stocks – now. Remember, market is always forward-looking! Also, on the positive side, I see that the crude oil is much lower now than it was couple of weeks back. I do not see crude prices being a major threat, now that the US has promised to tackle the supply situation by increasing the production.
Investing may sound simple, but it is not easy. At times you have to take contrarian bets in the market. Precisely to help investors in this strategy of investment, we have discussed at length the benefits and opportunities of investing the contrarian way. Contrarian investing is not for all, as it requires deeper understanding of the markets and stock prices. Do read the cover story not only to understand how best to play the contrarian game in the market, but also to understand our contrarian bets for 2019. I hope long term investors will profit from our observations.
In one of the special stories, we have tracked FII investments in the Indian markets. We have analysed the sectors in which FIIs have been buying and how the stocks have performed after FIIs evinced interest in them. It is always good to know where the most influential market players are placing their bets! Do share with us your feedback on this particular special story.
At this stage of the market, where a major event awaits us, the best investors can do is to spend some time on researching quality bets and identifying strategy that can work profitably in the prevailing market condition. If the major event that we all are waiting for throws up a negative surprise and the stock prices correct – trust me, we will have a huge buying opportunity. If the markets shoot up rapidly post the election results, the inflated stock prices can be used to book profits and rebalance the portfolio. The strategy ought to be flexible right now and should allow investors to encash any opportunity that the markets may offer.
The Indian markets have a catch up to do with the developed markets. Opportunities do exist for the stock picker and life will get exciting when the broader markets start chipping in. Post the election results, we expect the mid-caps and small-caps to start doing well. Keep hunting for value in the broader markets!