The best thing about this scenario has been the visible boost to the fortunes of many Indian corporates, which were otherwise grappling with balance sheet woes. The money pumped in gave them an opportunity to grow and expand their horizons of choice. The positive loop from access to capital and the associated revenue gains has been the highlight of the growth story.
The scenario globally, in our view, is nowhere close to a strong footing as perceived. While, world markets will sail through this year, a global correction is likely sometime next year. The Indian bazaar, convalescing on the saline of liquidity, will obviously take a beating as markets are correlated. The gravity of the correction in India would be much less as compared to the world markets though.
By virtue of its emerging value and the sheer wealth of opportunities for global investment across verticals, India would actually be in a sweet spot of sorts. We seem well poised to outperform the world in the years to come. Several factors augur well for this emerging place of pride.
The RBI has shown remarkable prudence in consciously giving growth a higher priority and proactively responding to counter the fiscal crisis following the global debacle. Only once the credit growth is fully revived, the RBI will commence the gradual tightening of money supply. In April 2010, WPI is likely to be 6.5%+. After March/April 2010, we could possibly witness a tightening of policy rates.
While the fiscal deficit continues to loom large, most other macro indicators are registering incremental growth. IIP is reviving, railway traffic is back to 8 to 9% levels, property prices are bouncing back and employment opportunities are mushrooming across verticals.
The government sops have also been a big boost. The ongoing rural employment guarantee scheme, farm waivers, dearness allowance hike and higher minimum support prices is translating into more purchasing power for the rural and middle-class segments – both together forming the bulk of India. The ensuing wave, consumerism, will undoubtedly strengthen market confidence. And going by historical evidence, there could be a bounce-back in agriculture in 2011, typical of the year following a drought. We expect GDP growth to be 7.6-7.9% in FY11 due to a much improved investment outlook, especially for infrastructure, a recovery in consumption demand and a perception change in the external environment. A low base in agriculture from FY10 also contributes to higher GDP growth expectations.
Bottom up Cheer
We believe non-index stocks are poised to outperform their larger peers. Investors would do well to adopt a bottom-up approach while buying. We recommend additional buys on any market dip. Despite rich valuations for most Sensex stocks, the market sentiment is positive enough to see us sail through in 2009. Hence, from a medium term perspective, the period beginning now till the point of global correction next year is conducive for investment. Besides, in inflationary times, it’s best to stay invested in some asset rather than cash. Currently, equities score over Gold or any other asset.
The legendary Warren Buffet often said:
“I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over”
Never let the thought of the impending correction ever perplex you and don’t be hypnotized by the honeymoon of liquidity either. Look around for the 1-foot bars, which will be the stepping stones to your portfolio’s success.
Popularly known as the ‘festival of lights’, Diwali also signifies ‘the awareness of the inner light’. Last Diwali, when the street was plagued with pessimism, we had recommended a portfolio of 15 large cap stocks. Needless to say, the performance of the portfolio has been stupendous. This year, one needs to dig deep as discount sales may be missing in the main index stocks. However, there are bargains to be hunted in the broader market with several noteworthy stocks to be picked up even at current levels. Some do not seem attractive at a cursory glance, but there is tremendous value if one delves deeper. We bring you 14 stocks to buy during Muhurat Trading.
|Ahluwalia Contracts||Gayatri Projects|
|Anant Raj Industries||Infotech Enterprises|
|Bank of Baroda||KPIT Cummins Infosystems|
|Canara Bank||Lakshmi Energy & Foods|
|Consolidated Construction Consortium||Suzlon Energy|
|Dhampur Sugar Mills||3i Infotech|
Happy Diwali! Happy investing!