By – Mr. Jayant Manglik, President of Retail Distribution at Religare Securities Limited
Should an investor buy now? Or wait and try to time the market?
Let’s start by summarising the situation.
The rupee has fallen, mainly due to higher crude prices. Even more than rising US Fed rates, this remains the biggest speed-breaker to India’s growth story in the near term.
The rest of the problems are manageable, self-correcting or transient. India has consistently been a favoured investment destination in spite of hiccups; the pluses are huge and unmissable.
For a country growing at over 7 per cent, infrastructure will have to keep pace and that fundamentally sets the ground for growth in other sectors, seemingly unconnected. So, virtually all sectors in India will grow as demand rises, technology innovates and funds chase projects.
From an investor’s perspective, there are not many attractive alternatives to equity investment today. Real estate continues to sink in most locations, bank rates are unattractive, gold has been moving sideways for too long and some of the other options are too risky.
Combined with our substantial savings habit, this will automatically drive more and more money into equity, which can already be seen through increasing investment into mutual funds and is currently around Rs 10,000 crore net inflows even in a bad month.
Thus, this steady inflow will continue, which will increase with time as more and more people look to benefit from equity investments.
So why buy directly from the secondary market now? For one, markets have bottomed out, after over reacting to recent news flows. Stock markets always go into excess territory, which is the nature of markets.
This presents a buying opportunity today. Among the factors that depressed prices in the last few months, the Fed interest hike factor is overdone as far as our equity market is concerned and RBI’s interest rate hikes are already priced in to the extent of up to 0.5 per cent for this financial year.
Crude oil prices are the only real arbiter today for our market, and the rest is mostly smoke and mirrors.
With a booming GST collection exceeding Rs 1 lakh crore every month and a clear shift from the informal economy to the formal one, several stocks are set to gain.
Rural income is on the way up after another good monsoon expected and while inflation is still a worry with the recent hike in MSP, earnings recovery will be seen in this quarter as well as the next leading to higher stock prices.
Among sectors, infrastructure, agriculture related, FMCG and finance are my top picks. Among banks, it is better to prefer private banks as the NPA scare is still alive in PSU banks.
Finally, it is always best to invest in a disciplined fashion rather than randomly, even if you are in one of the world’s better investment markets. So invest what you save and buy on dips.
Also, invest only in quality stocks, invest for the long term and invest via a systematic investment plan. In any case, the best time to start is today and the easiest way is to buy into the Nifty ETF via your stock market broker.
Or if you have a risk profile which allows you to go after a basket of individual stocks in growth sectors, ask your equity advisor or your broker’s research team for specific stock suggestions for your consideration.
Mr Spock’s famous line from Star Trek ‘Live long and prosper’ can easily be adapted for India today and will say ‘Buy now and prosper’’!