Invest In Companies Showing Traction In QoQ Earnings Growth

We said in our previous editorial that markets will not fall below 34,000 level on a closing basis. Markets have indeed respected those sacrosanct levels and, going ahead, I think Sensex may trade range-bound in the range of 34,000 on the lower side and 36,000 on the higher side till March 31 at least. The risk-off mode in global equity markets will continue to fuel volatility in the equity markets and the investor’s confidence once again will be tested to the core.

 
Those who have been in the market for more than a decade will understand that the economy was in a fragile condition when major market corrections happened in the past. This time around, the economic set-up is much stronger and hence I would term the current market downturn as a healthy correction in the bull market. Christine Lagarde, Managing Director of IMF, recently commented on the good shape that the world economy is in and opined that the current fall in the stock prices is a ‘welcome correction’. What we are witnessing right now is a resetting of the market sentiments, valuations and investors’ expectations of returns.
 
It is important to focus on the underlying businesses and not get swayed by the market sentiment which may push you as an investor in taking a wrong decision. 
  
In this issue, we have discussed about the prospects of large-cap stocks and why we believe it makes sense to look at large-caps at this point of time. Also, do not miss our list of top-250 large-cap stocks in the cover story.
 
The agriculture sector in my mind will do well not only because the government has provisioned higher budget for rural development, but also because I believe the rural theme is one investment idea whose time has come. Good monsoon in the previous two years, higher MSPs and direct benefit transfer by the government will help improve the spending power of rural India dramatically. Watch out for all those consumer goods companies which stand to benefit from such rural transformation. Banks will be the other major beneficiaries of the growth in the rural areas. We have identified couple of stocks that can be looked at for investments.
 
Till the time an equilibrium is established between the bond market and equities market in the US, the equity prices will remain volatile. The US market’s volatility can be detrimental to the prevalent long term bullish market set-up, however, one should remember that the world GDP growth is intact and that several of the developed economies are showcasing decent growth. India is expected to grow by more than 7 per cent YoY. With that kind of GDP growth momentum in place, equity markets have only one direction to go, i.e., upwards.
 
Equity will deliver on its promise of higher returns, provided investors promise to play the market for the long term and focus on the core areas of businesses and ascertain if they are doing well. That’s it. Build a portfolio that includes good businesses where the QoQ earnings are showing a good traction.
 
Happy Investing!!