‘E’ In PE Will Define The ‘P’ Going Forward

I don’t know why investors and market participants are harbouring doubts about the strength of the current market rally. Many are speculating on the time and price correction of the benchmark indices. Frankly, one should rather focus one’s energies on identifying opportunities. Which means, this is the right time to search for those ‘Ugly Ducklings’ which are not fashionable right now, but may shine in the future. 

Nifty has already crossed the important psychological level of 10,000 and it seems to have comfortably settled above the 10,000-mark. Only time will tell if 10,000 will act as a strong support for the index--my thinking is, it will. 

There is a murmur in the markets on the impending correction as the markets are at record highs. While correction is a part and parcel of market behaviour, investors should use it to allocate more funds into the asset class that promises to outshine all the other asset classes in India. 

Even if the markets are at record highs now, we have noticed that almost 40 to 45 per cent of the BSE 500 index constituents have underperformed the key benchmark index Sensex over the past one year. 

While several scrips are touching record highs, there are some quality stocks with decent balance sheets which have not risen over the last one year or have even generated negative returns. We tell you what to do with these stocks in our cover story. Ideally, one should get rid of the non-performers and allow the portfolio to grow and flex some muscular gains. Indeed, the ‘sell’ decision is often the most complicated, under-researched and arguably the most important decision in investing. Let’s start focusing more on the exit strategy as an integral part of portfolio management and reap some regular benefits. Get more clarity on the exit strategy in our cover story and do let me know if you have applied it and benefited from it. 

With good monsoon on the cards this year, we thought it will be an opportune moment to revisit the fertilizer stocks and see if we can find some growth-oriented investment ideas. We are happy to include some investing opportunities for you in this special story. 

As mentioned in one of my previous communications and I reiterate it here once again – look at public sector banks (PSBs) with a long term horizon. I bet you won’t regret it. While private banks may be the flavour of the season, select PSBs will stand out. Avoid investing in the telecom sector. While IT sector and pharma sectors may have underperformed over the last few months, I see some buying opportunities there. 

We maintain our bullish stance on the market. Nonchalantly, the market is climbing the wall of worries, and on its way up, it is leaving many spellbound. The earnings will have to grow to justify the valuations and ‘E’ in the PE will determine the ‘P’ and decide the direction of markets in the second half of the year. I believe earnings will show some improvement in the upcoming quarters. 

We keep saying this time and again – invest in a staggered manner and in small tranches. Invest small, invest regularly and stay safe. 

V B PADODE 

Editor-in-Chief