When The Going Gets Tough, The Tough Get Going!
It just took six sessions of a fall of the Sensex starting January 17 for doubts to resurface in the minds of the investor about whether 2022 is going to be a green year for the markets or not. On the optimism side, the corrections happening are owing to factors already known to the markets i.e. bond yields, inflation fears and rate increase expectations. The only new entrant is the war tension brewing on the Ukraine borders. The bond yields rising in the US and in India indicate that the rise in interest rates will happen sooner than earlier. The crude oil price rise is also a spot of bother, especially for the Indian markets.
US major indices such as Dow Jones Industrial Average and Nasdaq after the recent fall are trading below their 200 DMA for the first time since March 2020 and hence the bullish momentum appears to have dissipated in the global markets over the near term. The Indian markets have a major event in the form of the Union Budget coming up and that will not allow the bulls to come back with a vengeance as a wait-and-watch approach is always a safe bet ahead of a major event. The expectation of a populist budget owing to elections around the corner is also acting as a dampener to the budget euphoria.
Meanwhile, the earnings’ season is in full swing and it looks like it is earnings that will arrest the market fall if any from here on. The earnings have been good and the management commentary has been optimistic though the IT sector earnings’ reports have not been well-received by the markets. To understand the earnings’ trend in detail, our cover story this time highlights the winners and losers across various sectors. Do not miss noticing the special mention of certain micro-cap companies that have declared stellar results this season.
The current issue also talks at length about the finance sector and various opportunities it presents to the investors. Investors are busy speculating the budget contours as the focus clearly may be on renewable energy, electric vehicles, manufacturing and the infrastructure sector. Railway and fertiliser stocks always remain in focus ahead of the budget session. This time around, substantial announcement regarding the green energy sector can be expected as momentum gathers strength for clean energy investments across the globe.
To understand this very subject and bring to your attention the theme of ESG investing, we have come up with a special story on ESG investing opportunities in 2022. Also, don’t miss out on the top three recommendations that promise to catch the megatrend emerging herewith. Charts are indicating bearish trends in the near term. The options data suggests that there are more bearish bets on the market at this point of time than bullish ones. These are the exacting times when long term investors can get value bargains as momentum investors’ panic and are willing to sell their stocks at depressed prices.
It’s time to revisit the proverb ‘when the going gets tough, the tough get going’. Have conviction in your top picks and bet on companies with good management that have a strategy in place to increase their market share. Now is the time when the odds are in your favour to pick quality companies at reasonable prices. Without attempting to predict the market direction – which always is a tricky business in the short term – it is safe to say that market is opening up lower levels to hop on. Do that and play it out. Outperformance in broader markets is likely to make patient and research-oriented investors rich in 2022!
RAJESH V PADODE
Managing Director & Editor