A Diwali Worth Cheering
At the outset, let me take this opportunity to wish you and your near and dear ones a very Happy Diwali and a prosperous new year. This Diwali, no doubt, will be remembered by many equity investors as it has allowed a majority to substantially enhance their wealth during the bullish year that we have experienced so far. The bull market came as an opportunity in disguise especially when hopes were running low owing to the pandemic-triggered difficulties that all of us faced earlier. From last Diwali to this Diwali we are up by almost 49 per cent while BSE Metal, BSE Realty and BSE Industrials are up by more than 100 per cent each.
Even the most underperforming index, BSE FMCG, is up by 27 per cent from the previous Diwali! To understand where the markets are headed in the coming months and to get a bird’s eye view on equities, we have in our cover story explained in detail the equity market outlook. I am glad to let you know that our Diwali 2020 portfolio has outperformed the BSE Sensex index. Our Diwali 2021 portfolio, part of the cover story titled ‘Muhurat Picks for Samvat 2078’, comprises 12 high-conviction ideas that have been cherry-picked and we would advise you to take them into consideration while building a portfolio.
Remember, it’s the portfolio that matters. Hence, keep your focus intact and don’t be unnecessarily adventurous by just investing in one or two stocks of the portfolio. Each idea is supported by an explanation or the reason for selecting that stock. This we believe will help to build the needed conviction to invest. And since it is our habit to look at both sides of the coin, let me add that at current valuations the market is priced to perfection and any amount of disappointment in earnings may lead to a steep correction. This is exactly what happened in October 2021.
Several so-called high-growth stocks reported positive earnings but failed to meet investors’ growth expectations as priced in the valuations. Such failure to impress investors with super growth has led to a sharp correction in the stock prices of select IT stocks and stocks from the chemical sector. Meanwhile, we have added an extra zing to this Diwali issue by also doing a special feature highlighting the banking sector where we have recognised the top-performing banks based on predefined criteria.
Thus, you will get a useful insight on a sector that is best placed to benefit from the economic recovery. Further, if we look at the markets, the FII flows in October have been negative and that may continue for a little bit as tapering may start by the end of 2021 i.e. December. However, FIIs withdrawing completely is not a big concern as the mutual fund flows are substantial and will act as a buffer. Just to highlight this aspect, 2.93 crore new demat accounts have been added between March 2020 and September 2021 which has led to the increase of demat penetration from 3.1 per cent to 5.1 per cent.
As far as opportunities go, one can look at sectors that have underperformed as they provide a better margin of safety in the current scenario. Keep in mind that correction is part and parcel of the game. Keep an eye on entering stocks as the current correction may provide some good entry points. The journey from this Diwali to next Diwali could be another extremely rewarding one. However, one needs to continuously watch out for developments happening on all fronts. As a reader of our magazine, you are well-covered by our team which is constantly engaged in research and analysis to help you keep updated from time to time. Information, as is often said, is always highly valuable and more so when it is received in time. So, sit back and let the festivities begin!
RAJESH V PADODE
Managing Director & Editor