By Ruma Dubey, source: Fwd Mail
Carnage. Bloodbath. Black Friday. Crash.
These are the words of today! With markets around the world falling through the floor, the media is wracking its brains to come up with better and newer words, to give more perspective to the resounding crash on the BSE and NSE today.
The BSE at one time during the afternoon, threatened to go down 700 points but from a fall of 692 points, it soon started recovering, getting up back on its feet by with a 150 points recoup. There was a small period of time, when panic selling seemed to have set in but it was too short lived.
The big difference in today’s fall and that of 2008 is huge. Then, in 2008, one never doubted the India growth story. Yes, the world financial markets were facing the worst possible crisis in its history but India seemed more resilient. And there was not even an iota of doubt about India coming through, smelling of roses. Thus 2008 crash was more about amassing stocks without any lingering doubt.
But this time around, India is on a somewhat weak footing. Well, we are not as bad off as USA or Europe, that’s for sure! Yet, with our own set of domestic issues dogging us currently, there is a niggling doubt whether India is as resilient as it was in 2008.
India may not be as robust as it was in 2008 but compared to the rest of the world, it does seem much better off. We are more insulated today that earlier. Yes, inflation is an issue but it is an issue in most of the emerging economies. Interest rates are high and growth is moderating but that is saner than sitting on the rates, just to keep growth rates intact. And when we are talking about growth rate being shaved off, we are not talking about a huge dip, we are still expected to remain around 7.5 to 8%.
There is fear today about a double dip recession in USA. That seems unlikely as liquidity remains in the system. Yes, with the USA now forced to adopt some austerity measures, the will be a cut in world demand but it is better that US finally accepts its problems and takes steps to get over, rather than remain an ostrich with its head in the ground! Any economic problem in US affects the entire world. So yes, we could see some corrections but the silver lining here is that crude prices will dip, which means inflation could ease a bit and RBI might actually keep off more hikes!
We need to have a basic conviction in India and if that is intact, every dip is a great time to buy! Infact today’s market is a good time to start building your long term portfolio. At such time, when the stampede of the bears drowns out all other sound, investors should step back and take a good look at the falling chips. It is always in chaos that good opportunities arise.
Instead of looking at the debt crisis in USA and Europe, if we look at the earnings which have come from companies there, it does look like recovery has set in. Many companies are buying back shares and sitting on record high cash balances. Yes, talk about earnings at this juncture might seem frivolous but past experiences have taught us that once the mayhem settles down, it is always fundamentals which come to the fore.
Go cherry picking and look for stocks which are strong in terms of balance sheet and closer to their low points. Not every cheap stock is good – Reliance Infra, Rcom, Jaiprakash Associates are all big losers today. But they have huge issues and despite the lows, might not exactly be the best picks.
Go for stocks like Thermax, Shriram Transport Finance, Cummins, HDFC, IDFC, L&T. Irrespective of the markets, these stocks are rock solid and always provide value over a longer period of time. Do not go bottom picking in sectors which you know have issues like realty, auto, NBFCs. Look for stocks with very low or zero debt – probably the safest mantra today for investing.
We all admire and try to emulate the greatest investor of our time, Warren Buffet. Well, for such times, he said, “Be fearful when others are greedy, and be greedy when others are fearful”. Thus as the market caves in, stay at the rim and watch what you can pick, do not jump into the pit like the rest!
Just for your information: The new markets where FIIs are expected to start pumping in money are Thailand, Vietnam and Indonesia.
Disclaimer: The views mentioned in the above article are not that of VRIDHI. We may or may not subscribe to the views.
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