It is true that the past few years have been
terrible for Indian equities. Returns have been poor, valuations were
high and volatility even higher. A combination of these led to Indian
investors opting to stay out of the stock market, instead opting to
invest in safer bets like a fixed deposit.Even now, the case is not too strong for investors to dip their toes in equities. The global economy is sagging, the eurozone is close to a break up and even the US economy is bucking under pressure. The situation is not all hunky-dory back home either. Interest rates are at an all time high, and yet inflation continues to rear its ugly head. The rupee has depreciated by a huge margin, the fiscal health of the country is worrying and faith in the government has almost vanished due to their inaction on the policy front.
The silver lining in all of this is that things can improve from here going forward. It is said that the stock market bottoms out a few months before the economy does. We have already had a bottoming out in equities, so this might just be the worst for the economy.
Speaking at CNBC-TV18’s Investor Camp, managing editor Udayan Mukherjee says that investors should look at the market for cues, not the negative headlines glaring at us from newspapers. Despite all the negative sentiment, the Sensex is still around 17,000 levels, bluechip stocks have rallied around 25-40% in this year itself. He persuades investors to look to the screen for cues, because it is now time to build one’s portfolio.
Valuation Worries
During the period from 2003-2008, Indian equities saw a strong bull market, which took stock prices to new highs. Soon enough, investors started getting worried that the Indian market was overvalued, and thus a not so good investment.
This time round, however, things are different. Sandeep Shah of Sampriti Capital points out that the Indian market is undervalued from even a five year perspective, and therefore it is a good time to step into the market. There may a few bumps here and there, but he asks investors to stay strong because there is a chance for strong gains in the future.
Shah predicts a risk-on trade in the market. He explains that there will soon be a surge in liquidity, which will remove the risk aversion that is present currently. It won’t be a runaway bull market, but things will start improving steadily from here on.
He also says that Indian macros will be relatively better this year, and therefore it is time to focus on the positives instead of all the bad news.
His advice is to bet on the consumer goods space, because he sees a strong bull market phase coming up. However, he warns that infrastructure and consumer goods companies may see more risk because of their dependence on government reforms.
All in all, the view is that the tides are turning, and this is the best time to step in and enjoy good returns.
