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Where are we heading towards?
As Written in earlier article “2018 will be the year of investing in tranches in some strong names and businesses and the benefits will be reaped on the later stage in mid-2019 and onwards” and we can sense the same as per the current scenario. Pre election rally has been sensed. One can expect massive movements in market till elections.
Is that we are heading again towards big time correction ? I don't think so this is how market reacts when it wants to take down weak hands out of the market. Bargain buying should be the way we should react to such shocks. We are in the Mid cycle and no one can correctly predict how long will the cycle last and when will it will make a U turn.
Relief rally before elections or odds out of market ?
As per the data Mid and small cap have rallied most of the time post elections and has beaten the benchmark index in terms of returns. It is likely this will continue this time too. It is concluded that the Election has more effect in short term, less in medium term and it diminishes in the long term after the Election announcement. Mid and small cap which has not performed in the previous rally from 10000 to 11800 can soon see a sharp upside post elections.In 2018 saw significant correction in Mid and small caps as the valuations were going insane so mean reversion was bound to happen.
Is the market safe at current juncture?
Looking at the healthy correction which market went through the juncture looks safe for next 2 years. As per cycle theory the market can also mature somewhere around 2020-2021 which should be again a point where rethinking on markets needs to be done. Small corrections of 300-400 points in Nifty needs to be overlooked as we are discussing over the larger picture and in that process jerks are bound to happen. NITI Ayog has projected that India would be a $10 trillion economy by 2030.
In which part of the cycle we are ?
MARKET OUTLOOK 2024 (If we consider as 8 Year cycle)
1991 -1992 - Harshad Mehta
2000 -2001 - Dot Com
2007 -2008 - Sub Prime Crisis
2015 -2016 - Modi Wave and Economic development
2023-2024 - Awaited
MARKET OUTLOOK 2020 (If we consider 4 year cycle)
1988-1992 – Boom (Harshad Mehta)
1992-1996 – Recession (Bank Scam)
1996-2000 – Boom (Software & Tele) K P
2000-2004 – Tech Bubble Burst
2004-2008 – Boom – FIIs Flow – Mutual Funds
2008-2012 – Recession, FIIs Sell & R Power story
2012-2016 – Modi wave ( 2015-2016 can be termed as period of consolidation)
2016-2021 – Extended Boom
Extended secular Bull Run from 2012 where we saw no major movement in 2015 and 2016 which can also be termed as period of consolidation.
Market has the tendency to run on cycle and we are riding on bull where jerks are bound to happen. I won’t say that ride will be smooth but the destination will be beautiful as it has been in 2017. There is a saying in the market which I always come across “Buy and Forget”. In my view, this scenario is no more applicable with the changes as seen in markets. Its “Buy and Review with intervals” will be the correct strategy of investments.
What approach should traders use for trading?
Technical Analyst has increased drastically over the years so is the accuracy in respect of technical study has reduced. False breakout and breakdown was less used terms earlier now has increased drastically. There may be difference of opinion in the above statement. Technicals can study when to buy and sell but now what to buy and sell where fundamentals and future outlook comes into picture.
Trade in High quality stocks and not the market fancy names which will safeguard your capital at first instance and adding profits at the second place.
What approach should investors use in investing?
“Pyramid investing should be the strategy for 2019”- It involves adding to profitable positions to take advantage of an instrument that is performing well. It allows for large profits to be made as the position grows. Adding position with Fundamentals and foremost thing while investing should be looked into is Invest the amount which you are ready to loose or we can say where there is no immediate requirement of such funds for next 5-7 Year.
Themes which can be rewarding for investing –
Investing in cyclical stocks is inviting trouble to yourself. NBFC is still not looking great at this Juncture whereas Banking can lead the BFSI Show.
The growth in insurance industry has been spurred by product innovation, vibrant distribution channels, coupled with targeted publicity and promotional campaigns by the insurers. Innovation has come not only in the form of benefits attached to the products, but also in the delivery mechanism through various marketing tie-ups. The effectiveness and cost of diverse distribution strategies of different players is crucial in ensuring the success of players in the insurance business, particularly in the retail lines of business. Now insurance is being respected as a way of securing future and financial planning which was less understood by masses some time back.
Travel is contributing 6.23% to the nations GDP. According to the statistical data the Indian travel industry is set to grow from a $33 billion in 2015 to $56 billion by 2020. More than 50% Jump is expected in next 2-3 years. Higher disposable income, increased connectivity via Air and other modes of travel has added spark to this sector. With better availability of Hotels, Cheap hospitality providers and ease of booking online has been a great motivation to the industry to flourish. Medical tourism is another area where we excel. Growing solo travelers, Leisure travel, Pilgrimage travel & historical travel have increased significantly. Luggage Bags, Low budget hotels, and Tour operators is the area where traction will be seen. These are not the stories to for a year or two they are for long term investing.
Infrastructure (Not Real estate) -
Real estate sector is not looking good for medium term; growth may remain flat during the year as there is huge unsold inventory especially in the luxury space. Unsold inventory has negative ripple effect on BFSI sector. Investors who are keen on exposure in real estate, there lies an opportunity to invest in commercial spaces with the investment objective and earning out of rental yields. Infrastructure includes digital Infrastructure where Data is now an asset for the any unit which is used for decision making. Data is being accepted by many and when masses accept the same we will see a big transition again. Political parties manifesto outlays big budgets for the sector. Be it any government Infrastructure is something which cannot be overlooked by any of them as that is the backbone of development in economy. Markets would like investments in roads, infrastructure and power plants as it has direct impact to country’s GDP. Hence infrastructure will be in the limelight in years to come. Selection of stocks in this space will be the key area where one has to put thrust on.The major risk on most of the infrastructure companies is burden of debt which led the sector and NBFC companies undergo a depression phase.
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