This has been one of the most brutal months in the market in terms of sentiments. The amount of real negative newsflow has been massive- Trump raising tariffs on the Indian exports to unprecedented 50%, incessant FII selling and falling markets. Markets have corrected yet again and there is a lot of pessimism on the street.
The yearly SIP returns have turned negative and so have India’s Nifty and Sensex returns. Every positive news has been shrugged off and the negative one lapped up by the indices. Is the Indian story finally over and we should go home and stop expecting returns?
For someone like me, there is a clear sign of contrarian buying emergence. I was smelling a lot of over-valuation in the past few months and we did speak out of the lack of opportunities with everything fairly overpriced. This correction has at least taken care of that part of the story.
Now you have to understand something which is more real. Indian GDP grew at 7.8% in Q1 of the current financial year, beating the most optimistic expectation by a wide margin on the upside. We are experiencing stable low inflation after years of sticky high inflation environment. The government is also finally waking up to push the consumption story, first through personal income tax cuts and now the GST rationalization. Yes there are challenges to exports but please understand that India is largely a domestic consumption economy with total merchandise exports constituting less than 10% of the GDP.
If our $4 Trillion GDP starts to grow at 7%, it means we will add close to $300B in a year and this increase in wealth creation will finally nullify every negativity which currently clouds our judgement.
Most importantly, the Indian entrepreneurship culture coupled with equity craze is here to stay. People now understand that a dip is a buying opportunity and the stupid retail isn’t that stupid anymore. He also includes people who are either hiring professionals to manage on their behalf or putting in serious self-study hours to understand what it means to be an investor in the markets. The amount of money which is going to come in this market is only in its infancy and the final gush will surprise even the most optimistic amongst us.
The old adage that you bet on India in the face of all adversities stands true. The glass may only be half full but its going to finally be filled to the brim and more in years to come. I, as a student of the market truly believes this is the time to bet big on India and start buying what you truly think can have more value in the coming years.
One disadvantage of the equity markets is that everyone knows the price of its portfolio every minute. You may want to buy for the long term but a 10% crack in two days shake your conviction to the core. What was selling for 100 yesterday and looked cheap may sell for 80 tomorrow and still look expensive. Moreover, the pressure of trying to beat the markets can overwhelm anyone including the seasoned investors.
The key to investing wisely is to buy what you truly understand, something with strong tailwinds at its back and then hold on to whatever quantity you have if you can’t add. After this, remember that the first 10% on either side of the portfolio is market’s wish and can come or go in a day. Your portfolio can and will fall or rise 15-20% in a month and you must live by that. Unless you can stomach that much of volatility, you also don’t get to experience market beating returns of 30-40% a year which make you truly rich over time.
What we are doing is to hold what we own and buy what we can. Like everyone else, we also run out of money, doesn’t matter how much we try to keep as cash as like every greedy investor, we love accumulating our stocks when the prices are low. They of course fall further and we look like fools, but we are ready to face that situation. I truly believe that with the froth largely off in most loved sectors, especially the ones we have liked before, its time to be aggressive and buy, buy and buy.
What was the bottom in April may not be repeated but I think this is only a temporary blip in markets journey from 21800 bottom and a lot of stocks which are up 40-50% since then are only taking a breather. The cycles are short and volatility heightened. What you must do is to have deep conviction in the stories you like and own them through thick and thin because that’s how the returns are made in this market.
Stay Bullish on India, it works!
The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.
Life is all about Compounding! 