Focus Back On Fundamentals
Wow. What a week! The best week in 17 years for the Bulls and they were partying hard last night. But, now the BIG events are over. The political brouhaha is behind us. The benchmark indices in India hit upper circuit for the first time in history is now in the record books. And, the IPL will finally be over this Sunday. The television screen in our homes will now show more news – biz, political and trading in the US one we reach home. Ahoy, what fun – all glued into the market through the day and night. In short, the euphoria is behind us as we turn the reality road. Not surprisingly – it may appear very different.
For one, investors looking for continuous up move in the Indian equity market would be disappointed. Agreed, India voted for stability. The UPA led government minus the Left at the centre means reforms and growth (and high inflation and taxes). The uncertain market gave the election outcome a thumbs’ up and assigned a new aggressive valuation to India. Irrational exuberance or heavy buying frenzy from those waiting on the sidelines, the 17% freeze in less than 60 seconds, did not allow the ringside viewers to capitalize. The event was discounted immediately by not allowing anyone to fill in the void.
Having said that, one must understand that this time round there were no Bears being squeezed. The fight was up with the Bulls vs those sitting on cash. Historically, everybody loves the Bulls. Yes, we all do (though I am often labeled as a perpetual Bear). Sentiment exodus from pessimism cheered all. But, it created a left out feeling. Reliance AMC is one of them that held up to 33% cash in its equity portfolio. And now it’s playing catch up by deploying the cash, not to miss the Indian growth story. There are other such institutions of foreign institutions and small retail investors’ portraying the left out feeling.
The moot question now is whether this cheer is short lived or would last long. As my friend – Ashu Dutt would ponder over lunch (our staple – dal khichdi and anda bhurji), a significant percentage of your returns come from these mega days. If you are not invested in these times, your returns ought to be sub par. True. So my question here is, “Is it advisable to plough your hard earned money into equities now?”