2018 Promises To Be Exciting Year For Value Investors
While writing to you for this edition, I quietly realised it is our 32nd Anniversary. After feeling nostalgic for a while, I realised how long and fruitful the journey has been. I must tell you that there has been nothing more exciting in my life than communicating to you the wealth creating ideas for 32 continuous years. What I have also realised is that over these three decades our enthusiasm to generate investing ideas and communicate them to all kinds of investors have only grown with the years. We have managed to beat the markets (benchmarks) in most of these 32 years. I am sure to continue our superlative performance in the years to come as well. I take this opportunity to thank you all our readers for your continued support and for showing faith in us.
Talking about markets, as discussed in my previous editorial, markets are consolidating within the 33,000-34,000 range on the Sensex. The range does look like it will shift to 33,000 on the lower side and 35,000 on the higher side. While the consolidation, in my view, may continue till the end of this month, markets should take a clear direction post-March. That direction could be northwards, mostly. The election outcomes and global markets may dictate the undertone of the markets; however, I am enthused by the recently released economic data. The positive IIP number and lower inflation number augur well for the equity markets. I expect GDP numbers to improve from here on in every quarter for the coming fiscal. Also, the earnings will improve QoQ. I see no reason for market participants to panic as the fundamentals are intact and are, in fact, seen improving every quarter.
I think it may happen that small-caps and mid-caps may take a breather and large-caps will start outperforming in 2018.The year 2018 may belong to infrastructure, banking and pharma stocks. Watch out for quality cement stocks and PSU banks, such as SBI and Bank of Baroda. The PSU banks are now available at throwaway prices for the long term investors. Agreed, the PSU banks have been wealth destructors in the past few years; however, we may see some consolidation in the banking sector and one can expect reforms in the banking sector to address the current issues faced by these banks. Airline stocks and metals can be avoided at this moment as I do not see any growth opportunities in these stocks. Even if one were to include stocks from these sectors, one must exercise utmost caution. In spite of the global headwinds in the market, I expect the liquidity to flow into equities and such liquidity should provide ample support to stock prices.
India is growing not only in terms of its GDP, but also in terms of its reputation globally. How often have you heard of India being a headquarter of a global intergovernmental organisation? Delhi now will be the head quarter of International Solar Alliance, which is an intergovernmental organisation launched in 2015 by Prime Minister Narendra Modi to promote the use of solar energy. This, in my view, is a proud moment for India. It reflects India’s capability in taking global leadership on issues that matter the most in today’s environment. India is successfully heading towards a clean energy environment and it talks a lot about the changing mindset of the world’s fastest growing economy. It is the same leadership that will deliver on economic growth and should provide impetus for all the sectors, even as the election period approaches.
The various announcements that have been regularly coming from the White House have indeed created shock waves in the global equity markets. Most of the announcements made by Trump are aimed at China and to protect the interests of the US economy. I do not think the introduction of tariffs and import duties will affect the exports of India too much. I will be little concerned about the direct impact the US policies may have on the industry fortunes. Having said that, the market sentiments may be affected negatively in 2018 by such announcements from the White House. Globally, the rising interest rates and the fear of trade war are keeping the bulls in check, for now.
The crude oil prices are now subdued, thanks to the US natural gas output and the demand in the global markets. As mentioned previously, I do not see crude oil price increasing more than $70 per barrel. India should be happy with these prices.
In this issue in our cover story, we have talked about the top wealth creators in Indian equity markets. We have shared in detail out market outlook for 2018 as well. I hope you will benefit from the same.
Also, in this issue, we have spoken on the booming SME sector in India and its increasing significance. The SME platforms have created an unparalleled investing opportunities for investors in India. The special story also contains interviews of the captains of the SMEs, who have shared their perceptive insights. I am sure you will relish them.
You will also find the best of DSIJ product recommendations over the past years. The report card is indeed a testimonial of our market-beating performance across different products. We hope the report card works as a guide for you to choose from the various services offered by us.
On a concluding note, if we consider on a YTD basis, the emerging markets have outperformed the Indian markets. Brazil and Russian markets are up by more than 10 per cent each on a YTD basis, while Sensex is down by 0.65 per cent. In the coming months, India should do a catch up. The GDP data and the earnings growth may compel FIIs to look at India positively and that should push the stock prices higher.The current year is a year for you to accumulate quality stocks. It is not a year where you book profits and exit the asset class that promises to deliver more. In spite of volatility, 2018 promises to be an exciting year for value investors.
Define your equity strategy and focus on your strengths as markets may punish any misadventure this season.
Happy investing !