Time To Reward Consistent Performers!
It is always a feel-good factor when your predictions come true, be it election results or stock market direction. Now that the major event in the form of national elections is behind us, investors can focus on factors that impact markets in the long run, viz., inflation, macroeconomic data, interest rates, earnings, etc.
With a stable government in place, investors can not only expect continuity in policies, but also proactive measures to propel economic growth. While the US-China trade war threatens to dampen the sentiments for equities worldwide, it actually offers a great opportunity to India to attract business from the US. There is no doubt in my mind that the US sees India favourably when compared to China. With India emerging as a world class manufacturing hub, I think the US would like to do more business with India than it has ever done before. This may lead to higher investments in India and boost domestic private investments indirectly.
The RBI may reduce interest rates by 25 bps at least in the coming quarters. This should help corporate India reduce its cost of borrowings. The mid-caps and small-caps have been under performing the large-caps by a huge margin. It is high time, in my view, for the broader markets to catch up with the large-caps and start delivering. Focus on quality mid-caps and small-caps should be the top priority for the investors right now.
Coming back to earnings, the most integral part of the stock market, we find that the current season has not been impressive for the broader markets. In our cover story this issue, we have analysed the Q4FY19 results thoroughly and have highlighted the hits and misses of this season. What is clear is that the margins are shrinking and very few companies are able to grow in terms of sales and profits, while also improving their margins. Do go through the list of companies we have shared in the cover story that highlights those companies that have managed to grow in terms of sales and profits, along with improved margins. We would like to hear from you on the cover story, so do help us with your feedback.
To be successful in the market, one needs to strike the right balance between greed and fear. The intensity of fear is said to be higher than the intensity of greed. Investors have shown a tendency to take irrational decisions when fearful, thus resulting in the under-performance of their portfolio in the long run. In our special story this issue, we have discussed at length the healthy investment practices to manage fear. I am sure it will be a delightful read for you all, and an important one, considering we all get fearful in the markets at some point of time in our investment journey.
At this point of time when a major event is behind us, the focus should be back on the basics that matter the most. The trick is to identify consistency in performance of the companies. In current volatile times it will be prudent to focus on those companies that are growing in terms of sales and profits with improving margins. Build a diversified portfolio cautiously by including consistent performers!
Happy Investing.