Add a Sparkle of Wealth this Diwali
By the time you grab this edition of your favourite stock market investment newsletter, you might be giving final touches to your Diwali shopping and also to your investment plans. Festivities are in the air and so are thoughts of wealth creation. There is reason enough to cheer this festive season. The Indian market is at a record high level. Moreover, it has rallied more than 10 per cent in the last couple of weeks. It’s no small wonder then that there is in the air the mood of a carnival. To help you take the right investment decisions this time of the year we have for you, dear readers, a ‘Diwali Special Portfolio’.
But first let’s do a small recap of Samvat 2076. To sum it up in brief, the Indian markets have come full circle. Record highs and nerve-racking volatility on the back of the pandemic and fears of recession on account of the lockdowns have followed in succession. As of now, the possibility of a vaccine is what has given buoyancy to the markets. In short, all the possible emotional traits have been on display in Samvat 2076. Amidst all this, the Nifty has recovered nearly 69 per cent from the low of March but it has delivered only a single-digit return of nearly 9 per cent from the close of last Diwali to today.
On the sector front, Nifty Pharmaceutical and Nifty IT have been the best performers with all the constituents of Nifty Pharmaceutical delivering positive returns while Nifty IT gained by as much as 90 per cent. On the other hand, the Pied Piper of the previous Bull Run, Bank Nifty, which is yet to reclaim its all-time high, has been an underperformer. This can be gauged from the fact that only three stocks have delivered positive returns.
During last Diwali we had shared a target of 13,300 for the Nifty and though that was not met, we had indicated a level of 10,500 to watch out for on the downside. However, what’s gone is in the past and let’s look into the crystal ball for what lies ahead in Samvat 2077. As we step into a fresh year, the recent uptick in economic activity is heartening and the news of advancement of the vaccine has further heighted the optimism level. But, still many are in a state of flux about whether this economy recovery is genuine or it’s only due to the pent-up and festive demand.
Well, the pent-up and festive demand could be contributing factors but not the only ones driving a rebound in the economy. Moreover, if one is looking to invest in the stock markets with a long-term horizon, there need not be any issues or worries about the short-term questions being raised on the economy front as it will only result into confusion. Therefore, if you are a long-term investor, keep that as your focus since the markets are always forwardlooking. The reforms announced by the government and the boosters given to the various sectors from time to time would help the economy in the long run.
In a recent development, the Union Cabinet has approved a whopping Rs 1.46 lakh crore package by extending the production-linked incentive (PLI) scheme to 10 key sectors. With this move these sectors will attract investments, boost domestic manufacturing and enhance exports, thereby enabling companies to become part of the global supply chain and generate employment opportunities. Further, market participants should keep a close eye on India VIX and FIIs inflows as the latter has been a key trigger for the current rally in the stock market. Meanwhile, one should also look at the Dollar Index as there is an inverse relationship between it and FII flows.
The India VIX, which is hovering around the 20 mark, is likely to remain in the range of 18-28 and a move beyond 28 could give us an indication of some uncertainty that the market is sensing in the future. We continue to reiterate to utilise equities as a key asset class for long-term wealth generation by investing into quality businesses which have good growth prospects. But what is more important is to time the entry and exit with proper planning. So let us sign off by wishing our readers a very Happy Diwali. Till then, stay safe and invest wisely.
