And Now the Tables Turn!

As mentioned in my last editorial, the market had already priced in factors such as higher crude oil, above average raw material prices, disruption in supply chain and the geopolitical situation but when a positive trigger like the news of HDFC and HDFC Bank merger surfaced, the market jumped up phenomenally.The HDFC Group’s visionary leadership has just demonstrated to all of us that an ‘elephant can dance’. So don’t ignore quality large-cap stocks just because they appear to be slow and boring. Also, it should not come as a surprise if the markets get closer or even cross the all-time high in the current momentum.

This goes to show the resilience of the equity markets and reminds us of an old adage – ‘buy when everyone else is selling’. There will be more opportunities to apply this adage as the markets are not completely out of the woods and volatility continues to stay. What is encouraging to see in the current recovery is its broader nature. The performance of mid-caps and small-caps has been of pure delight for long-term investors. The Adani Group stocks and the Tata Group stocks have been the highlights in the recent recovery trend.

Also, the HDFC Group’s stocks’ re-rating has set the tone for several mergers and acquisitions in FY23. We, at DSIJ, will continue to track this space. The positive momentum in HDFC Group stocks will create several opportunities for investors in interest rate-sensitive stocks i.e. banks and financials. Even the automotive pack is showing signs of recovery. When you have such sectors as automotive, banks and financials, IT and metals displaying promising signs, the index can only head higher.

In the cover story of this issue we have discussed the merits of value investing. Since stocks appear to be flying from all directions, the most sensible thing to do is to hunt for value and hold quality value stocks in the portfolio. The story is apt for the current trying times and something that you must consider as part of your investment strategy. In one of our special stories we have shared the ups and downs of speculative investing. Do carefully read through it as speculation can make or break an investor. We have analysed the infrastructure sector too in this issue and focused on the various investment opportunities for investors willing to concentrate on this most favoured sector of the current government.

Going forward there is a chance that we may get complacent and start believing that any crisis is a good opportunity to buy. While it is true that a crisis can lead to some very tempting opportunities, it is not accurate to say that all crisis situations are great opportunities to increase exposure to equity markets. Therefore, never let your guard down and definitely avoid leverage in the current market situation even though things are starting to look bullish. With rising inflation some may argue that the equity markets are likely to suffer. However, practically it is equity as an asset class that outperforms during rising inflation levels. Hence, more money is expected to flow in the direction of the equity markets and that should keep the stock prices healthy.

However, this flow can get constricted when rates are increased by the reserve banks – something that Federal Reserve seems to be fairly adamant on. Continue to spot opportunities in sectors that are trending. We keep updating these in the magazine and on our website. Also, identify an investment process that fits your risk profile. Keep analysing and refining the process until it starts producing market-beating results. Most importantly, enjoy this process and examine the results. It is worth the effort and time to invest wisely

RAJESH V PADODE
Managing Director & Editor