191027 – We at VRIDHI wish you all a Very Happy Deepavali and a Great Future ahead. There may be ups and downs in life and markets, both are so similar, but finally those who show faith in life live happily, and those who show faith in markets make some money. We at VRIDHI are taking all possible steps to better ourselves to serve everyone. Even we tend to learn from all ups and downs.
In a previous article, some time back I had mentioned that the biggest problems in the country right now are Liquidity, Automobile Sector Sales and the Housing Sector. Further in the previous to this, I was very particular that you should take advantage of the pre-Diwali sale and invest more money even if your current portfolios may be showing negatives.
From that day to today, the market has shown lot of stability and the Mid and Small Caps are slowly showing signs of recovery. Sensex and Nifty may be at all times, but they are not showing us the real picture. Read few of the older articles on this topic.
The problem of Liquidity:
We the people always wanted a government which fights against corruption. No country in the world has zero corruption, but in India it hit an all-time high during the year 2013. The government later brought in reforms like Demonetisation, GST, RERA, IBC, etc,. Which resulted in severe squeeze in liquidity.
The squeeze got so severe that the companies with even little bit of debt on the books saw value erosion in the stock prices and finally they had to sell stakes or assets to reduce the dues. Those days of promoters enjoying at the cost of banks money and creating NPAs are gone. All NPAs seen right now are the old loans which were disbursed recklessly.
2013 was the worst year; The corruption was at its peak, the economy was at a situation were we were classified under Fragile Five, it meant India was on the verge of collapse, the Rupee was on ventilator, The Fiscal Deficit was at its highest, the then government stopped spending money. Even the then RBI governor Raghuram Rajan was not accommodative and didn’t increase the liquidity. The next governor Urjit Patel was equally stubborn.
None of the above situations holds today. The present RBI governor Shaktikanta Das has already reduced interest rates many times. He knows that if the economy has to move up then the rates need to move down. The economy is not in bad shape as projected by the Lutyens. The government right now has realised that it needs to spend, earlier their focus was on fiscal consolidation, but now they know that they need to spend and infuse liquidity.
The recent Tax Cuts are big. Not many realise the benefits which will flow in future.
There are people who get up daily in the morning and plan on what negativity they can spread that day on Social Media. Stay away from such fellows. India cannot enter into an of recession for at least the next 20 years. Our young population will take care of all situations, after 20 years situation may get grim as people get older.
I have not visited Japan, but have heard that once you cross the borders of Tokyo, finding people becomes difficult. South Korea has the 7th largest pension fund in the world; by 2030 the country will have no people left!
70% of sales happen by financing. The automobile also has certain issues like BS-VI and EV’s coming up. Look at the stocks they have already entered the stability phase. We at VRIDHI have started building positions in the sector. We feel the last quarter of this fiscal will be good for the sector.
The worst is behind us in the sector. Things can only get better from here. Don’t expect any big shocks. People are Risk Averse, and hence the stocks get beaten down the moment a news is heard. True news or False news is no botheration, and the bears go for the kill.
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The Current Situation:
Low Expectations, Low Valuations, Lowest Point of Growth which can only get stable from here, Improving Earnings, Improving Liquidity can bring some cheers to the market. Even the FII’s have returned.
The Crude is stable, Rupee-Dollar is stable, the government is stable and strong. Only a pessimist will avoid adding money in the market right now. If you don’t have fresh money, wait. Things will turn around. Don’t panic and exit the markets. There will be a moment when some changes will be needed in the portfolios. The moment market gives signals do that regiging work. We will advice investors on this.
Hence, this Diwali, burn off all the negativity which some people have dumped in your minds and think positive and continue investing. The amounts are not important; the discipline is.
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