Let a Specialist Lead the Way
It is our job here at Dalal Street Investment Journal to analyse various factors that impact the financial markets. This helps to predict their course with a certain degree of confidence.The flow from foreign institutional investors (FIIs) is one of those factors. In fact, it is one of the dominant factors determining the performance of the Indian equity market, and currently it is not helping. In India, FIIs have been on a selling spree for a while and from the month of October 2021 till now they have sold domestic equity worth Rs2.6 lakh crore. This is one of the highest figures reported in such a small span, twice of which was seen during the global financial crisis of 2008-09.
Even after adjusting for market capitalisation, it is the highest ever outflow rate. The reasons that have led to such historic selling include lofty valuation of the Indian equity market to start with in addition to the weakening domestic currency and increasing US’ bond yields. Going ahead, most of the factors that led to selling by FIIs would be moving into a rather favourable zone. The valuations of Indian stocks have cooled off. The US’ 10-year bond yield has also come down from its high of around 3.5 per cent to below 3 per cent currently and a major part of the rupee depreciation is done.
Further, the Reserve Bank of India (RBI) has also taken several steps that will help to strengthen the Indian rupee. All these factors are already being reflected in the flows of FIIs. The 10-day moving average of FIIs has already come down to three digits compared to four digits that we had been witnessing for a while now. This does not mean that we are predicting their return sooner. The emphasis is on their outflow with the slowdown. This, coupled with strong domestic inflows, is likely to provide the required support to the equity market.
Hence, personally speaking, my suggestion is to prepare your buying list and keep on buying in a staggered manner at every dip. Do not buy stocks based purely on the fall they have witnessed recently. History has shown that a new bull market is usually led by new sets of companies and sectors. Identifying such sectors and companies is a professional job that requires the right domain knowledge. Most of the investors are not conditioned to face turbulent times. Therefore, it is better to select a partner that helps you in preparing such a list.
Our cover story in this issue explains the importance of hiring an investment advisor while also detailing the qualities to look for while doing so. Indeed, a seasoned investment advisor can help an investor in not only creating wealth but also protecting it. An important thing that most of us don’t do is to invest time in finding the ‘right investment advisor’. Hence, we hope the cover story builds the needed conviction and helps you in taking that first important step to create a win-win situation in the long run. We at DSIJ have been playing this role for the past 37 years via our bouquet of services and products.
Further, in this issue we have also analysed the automotive sector and highlighted some of the interesting trends that are triggering growth in this arena. Another special story in this issue sheds light on the opportunities available in the FMCG sector. Also, as is known, there are lessons to be learned from mistakes made while managing finances. Hence, we have discussed at length some of the big mistakes celebrities have made while managing their finances in another story of ours. This story intends to spread awareness amongst investors about such mistakes that are to be best avoided. So, until next time then!
RAJESH V PADODE
Managing Director & Editor