With the war between Israel and Palestine escalating, caution is the new buzzword in the investment world. The double whammy of spiraling crude oil prices as well as US-10Y bond yields has fueled outflows from emerging markets like India, leading to greater volatility in these markets. But the question now is – “Is market volatility a risk or an opportunity?”. Any seasoned stock market player would vouch by the opportunity veiled under market volatility. In fact, it is the ability of making the most of market volatility which separates the men from the boys in the world of investing.
First up, let us look at some simple facts. The Nifty 50 index is projected to achieve an EPS of Rs. 948 for the fiscal year 2024, indicating a one-year forward multiple of approximately 20 times. This is one standard deviation (SD) above its long-term average. Given the absence of substantial downgrades to Nifty’s fiscal year 2024 earnings at this point, we are maintaining our outlook for respectable returns in the index over the next 12 months.
However, a look at historical trends indicate that we might need to temper our expectations. Let’s take the example of September 2017, when the index was trading around 1SD above its long term average, and gave a return of 13% in the next one year. Likewise, in October 2018, the index was at 1SD above the long term average and grew ~14% in the following 12 months.
Now let us take a closer look at the denominator, i.e. earnings. At present, earnings of most large cap companies have come in line with the estimates. From here on, any positive surprises in the earnings of these companies could further boost earnings per share of the Nifty50 index. This, in turn, would drive the PE multiple towards the long-term average, making the valuation more attractive.
Recently released high frequency indicators (August/September) paint an encouraging picture of the Indian economy. These include continued strong momentum in the Industrial/Infra activity trends, strong ECB flows, favorable fiscal position and a very strong capex by the central and state governments, to name a few.
So, what can investors do to tide over market volatility? We bring you 4 strategies.
A portfolio of high dividend yield stocks |
Rupee cost averaging |
Portfolio beta hedging |
Long straddle/strangle option strategy |
|
|
|
|
So be game and use these strategies to leverage current volatility in the markets.
In conclusion, I would leave you with a quote from the Oracle of Omaha, Warren Buffet.
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.