The year 2014 was surely one for the stock market. Having witnessed a ~30% rise for the Nifty and Sensex in the previous year, the predictions for the New Year are markedly divided in logic and argument. Some marketmen feel 2015 may bring about only a single digit upsurge while some others are more hopeful in their analysis. The contrasting forecasts are hardly a matter of concern, for this is the time to gainfully focus on individual stocks rather than pin hopes on the overall market or fret and fume over its likely direction. There are many individual stocks with the power to yield 30% returns and hence the hunt should be for such potential winners. In the worst case scenario, we may have to bear with a market slowdown phase that may extend to the immediate future but a medium to long time frame of four to five years looks remarkably productive for the market.
There are a few factors that more than support this view. For one, the political scenario is at its very best for the country and there’s absolutely no reason to disbelieve the plum prospects waiting in the wings. How many times has India enjoyed the luxury of a historic mandate with a single party in majority, a workaholic Prime Minister and sweeping nationwide power acquisitions for the ruling party in state after state? In all probability, 2015 would be a year of meaningful political action. The government seems visibly determined to deliver its promise and the forthcoming budget would be the first tangible proof of its positive intent to usher in a reform‐led economic growth. Precisely why we have every reason to keep the faith alive and kicking.
At 4 to 4.5%, our fiscal deficit is placed at one of its lowest levels in the last three decades. The government can clearly afford to increase its Plan expenditure spend as also stagger disinvestment to get the right price. The crude oil status is a big positive and will undoubtedly help keep in check the usual suspects like current account deficit and inflation. Our position on the world map couldn’t have been better. In fact, it won’t be inappropriate to call India one of the brightest spot in an otherwise dark world. Once the rupee stabilises, we strongly believe, we should see a remarkable FII inflow to the tune of $10 billion plus over the next 6 to 8 months. Notwithstanding the possibility of an US Fed interest rate surge, there’s enough liquidity in global markets to see them through with key stakeholders Japan and Europe on a predominant easing spree. Interest rates too, will begin to drop sooner than most of us expect at this point.
Last but not the least; corporate earnings should gather momentum in the coming quarters on the back of the low base of last 3 years. With a gradual demand pick up and the benefit triggers of operating and financial leverage, the corporate scorecard is likely to rise by at least 17‐18% in each of the next two years. Yes, corrections would indeed remain an integral feature of the market voyage, as they have always been, but more importantly, the overall trend is only pointing to an upward march. Never mind the ensuing dips; the market is well poised to record new highs in the years to come.
Far from indecision, this is the time ripe for positive action…this is the time to correct the reactionary sentiment of panic and perplexity that gains ground on every correction…this is the time to increase our hand‐picked exposure to that phenomenal investment avenue called equities.
Wishing you all a Happy and Prosperous 2015!