Gloomy Days Fading Away, Its Time to Rejoice the Light of Samvat 2076
Before we get into the nitty-gritty of the stock markets, I take this opportunity to wish you all dear readers a Happy Diwali and a prosperous Samvat 2076! During the Samvat 2075, Nifty has delivered a return of about 10 per cent, which is far better than the Samvat 2074. But were investors on D-street smiling? To be honest, the answer is a big no. Investors witnessed a pall of gloom as the breadth of the market remained narrow and returns delivered by the broader indices, like Nifty Mid cap and Small cap were negative, wherein, both the indices lost about 7 and 10 per cent, respectively. Many stocks were down and out while some saw an erosion of more than 50 per cent. To cut the story short, most of the portfolio has not seen a twinkling light during the Samvat 2075. However, as we put our foot on the pedal and enter the Samvat 2076, we see market sentiments turning buoyant on the back of a number of supply and demand-side reforms, introduced recently by the RBI and the government.
In the last couple of months, the government announced several ‘out of the box’ measures to revive the economy from a slump. Further, world’s two largest economies, the US and China, thawed the logjam on trade and, unlike the earlier attempts, the urge towards a resolution is higher. All these are translating into improved confidence of investors in the Indian markets. As of now, we can safely say that equity investors will surely be wealthier by the next Diwali than this one as there are high odds of Nifty delivering a return of 12-15 per cent returns over one year’s time.
In this context, one may talk about the headwinds faced by the Indian economy in recent times. Our response to this is yes, the Indian economy has slowed down but it is still healthy and continues to be the fastest growing economy in the world. Also, one needs to understand the fact that markets are a forward-looking mechanism and they have already discounted and priced in the worst-case scenario. We are probably at the end of the cyclical downward trajectory.
The expectation of the revival in the economy and the reforms, undertaken by the government at the helm, is what is keeping the forward-looking equity markets exciting. Any correction in the quality and fundamental strong stocks is similar to the big bang sale, seen on the e-commerce portals, where you get to handpick products at the best possible prices. Let us not worry and scratch our head in identifying the tops and bottoms of the market, better to devote your energy and valuable time on identifying the next big movers of the next bull-run, which would be based on the quality of the management, debt level, high standard of ethics, and the economic moat. The well-known investor, Vijay Kedia, famously said once, “only two people can buy at the bottom and sell at the top-one is God and the other is a liar.”
In the recently concluded IPO of IRCTC, the kind of participation we saw from equity investors, speaks volume about the underlying positive sentiments among investors for a good company. Along with the prospect of improving the economic situation and also, domestic liquidity and earnings catch up, this is simply too good to resist for long-term equity investors.
For those who have been planning to create a new portfolio or rejig their earlier portfolio, what better time to start than the Diwali, the most auspicious and widely-celebrated festival of the country. We have come up with a promising set of top 6 stocks that are our top Diwali picks for Samvat 2076. Go ahead and create a new portfolio without any reservations as we believe equity, as an asset class, is expected to outperform the other asset classes.
To conclude, we estimate that Nifty may scale to levels of 13,300 by the next Diwali, while the lower limit for Nifty could be around 10,500 unless some catastrophic event breaks out. Make equity investments a habit despite the noise of gloom and doom and do not indulge in leverage trading. We will continue to be there to support you with our timely guidance on markets and identifying growth-oriented investing ideas for you.
