Celebrations Continue!
It is time to celebrate since frontline indices have hit all-time highs while stocks from different sectors have shone brightly with outstanding performances. For instance, one can see superlative performance of stocks of hotels and housing finance companies in the month gone by. Hotel stocks (50) on an average generated 25 per cent returns in one month, thus easily beating the trending frontline indices. On the other hand, housing finance companies (20) on an average have delivered returns of more than 10 per cent with the top gainer inching up by as much as 41 per cent in just one month! Thankfully, the focus has widened beyond IT and pharmaceutical sectors.
In my view, 2021 has been an extremely interesting period for investors owing to the rotational plays the market displayed in the first five months. Unlike 2020 when the market was dominated by select themes in defensives, the market is now willing to reward investors betting on the beaten down sectors and those sectors showing resilience amidst the downturn. The current market rally has invigorated the individual investor’s interest and appetite in small-cap stocks. In fact, small-cap indices have been outperforming the frontline indices. However, not all small-caps can be trusted.
In this special edition we have focussed on the top small-cap companies and listed them based on our set of predefined quality parameters. With investing in small-caps in vogue, one must tread cautiously going forward. We hope our cover story on small-caps will provide some insights for you to manoeuvre through this space better. In a special story, we have covered how the NBFC companies are coming out of the woods and leveraging technology to not only save bucks but also smartly acquire new customers. Meanwhile, with frontline indices in unchartered territory, the sky is the limit for markets going ahead.
However, do not rule out the possibility of a correction in the near term. Stay invested and do not chase prices with leverage. As of now, stocks related to real estate, hotels, financials, IT, banks, PSUs, cement and chemical sectors are upbeat. I do not remember when there had been a similar phase with so many sectors contributing to gains in tandem. The FIIs presumably have resumed buying and are likely to continue to infuse liquidity further into the system throughout the year. The better-than-expected GDP data is only a reminder of our strong fundamentals being in place. Clearly enough, hopes built around the vaccination program gaining momentum and ample availability of liquidity will hold the market high.
With the future waves of the pandemic expected to be less intense and more so in the form of ripples, the pent-up demand for travel, hospitality and consumer goods is going to kick in with a vengeance and spur the economy in time to come. For those who have already invested in the market my advice would be to remain invested and for those willing to deploy fresh money, buying on dips is the mantra that continues to hold good. When in doubt, continue to bank on your favourite DSIJ magazine to find a plethora of choices for wealth-creating stock ideas. Stay tuned and act positively on high conviction picks.
RAJESH V PADODE
Managing Director & Editor