Get Ready For Bottom Fishing

Another interesting phase in equity markets is facing us where the Sensex seems to have lost its mojo – temporarily- and has slipped the most in last seven months. 

The other emerging markets are available at a steep discount to Indian equities and FIIs are seen withdrawing funds from India and deploying the cash in reasonably valued emerging markets. I doubt if they can find same quality as India has got to offer. Indian markets have always enjoyed a premium to its peers and I know of no reason why the premium should diminish. It is just that Indian equity markets is faced with sluggish earnings growth for some quarters now and the economy is faced with some teething GST problems. These very aspects can reverse quickly and you will see the same FIIs deserting India now coming back to invest in the Indian markets with larger sums of money. 

While correction is always considered healthy in a bull market as it allows investors who are sitting on side lines to enter the markets, investors should start identifying investing opportunities without any reservations on the long-term potential of the markets. Don’t forget, these days stock prices correct sharply and recover sharply as well. 

Markets will start factoring a rate cut possibility soon. Various measures are expected to be taken by the current government to boost the GDP growth and a rate cut announcement from RBI is something markets will cheer with lot of enthusiasm. All eyes will be set on the Fourth Bi-monthly Monetary Policy meeting for 2017-18 schedule on October 3 and 4 next week. 

In this issue we have discussed about the IPO performance in 2017 at large and have analysed the pros and cons of IPO funding. CY17 has been exceptional in terms of listing gains for IPOs. Bull markets usually attract lot of new IPOs and the trend is expected to continue where we will see lot more companies hitting the markets. 

We also talk about paper stocks in our special report and have hand-picked some of the paper stocks that may do well in coming year or so. Do make the most of the recommendations and include them in your portfolio for diversification benefits. As the market valuations is high with the key benchmark index Sensex trading at a P/E multiple of ~23.4 we believe investors should get out of certain languishing stocks and use the proceeds to buy growth stocks. Do have a look at the stocks we feel investors should exit in current market scenario. 

With all the caution that investor may adopt in the corrective market, one must remember that there are tremendous opportunities in actively managing the portfolio. We have something interesting for you in our ‘Expert speak’ column in this issue which will put to rest your doubts on active Vs passive portfolio management. 

Buy on dips is still relevant in current market and one must take note that the Indian markets have had a straight seven-month dream run where the stock prices kept on rising. A correction is warranted at this juncture and is actually healthy for the markets. Do not panic. Hold on to your high conviction stocks, get rid of your low conviction stocks and start identifying your next favourites. 

Stay safe. Invest in staggered manner. Longer term up-trend is very much intact. 

V B PADODE 
Editor-in-Chief