Demonetisation Has Worked Wonders For Stock Markets In India

It's exactly one year since demonetisation and look where Indian equity markets are poised currently. Who would have thought post-demonetisation Sensex would notch up an impressive gain of 20 per cent? In fact, 21 out of 30 Sensex stocks have gained more than 20 per cent since demonetisation, while the heavy-weight RIL has gained nearly 87 per cent to emerge as the top Sensex gainer. What has surprised me is the performance of the realty index since demonetisation. Realty index is up by nearly 76 per cent, while Metal index is up by 42 per cent even as Oil & Gas index gained 37 per cent and Bankex was up by 28 per cent. 

Demonetisation has been a boon for equities. Mutual fund industry has been one of the biggest beneficiaries of demonetisation and we have seen record amount of money flowing into equity-oriented mutual funds in the past one year. 

Right now, it is possible that markets will correct a little bit. Such corrections keep the markets healthy and are a must in any bull market. Having said that, there is nothing in the markets right now that suggests an imminent major correction that investors should be worried about. Investors can stay light and be less aggressive at the current market valuations. Try to identify stocks which offer some margin of safety.

When momentum is strong in the markets, be it upward or downward, momentum investing is the best strategy to adopt for those with some dash of risk appetite. In our cover story, we have discussed in detail the pros and cons of momentum investing. Also, we have shared our top momentum picks for this issue which we think may beat the markets. 

In one of our special stories, we have termed ‘portfolio weighting strategy' as crucial for better performance of portfolio of stocks. I am sure the inputs shared in the article will help investors invest smartly and give deserving attention to how much weight an individual stock should be assigned in the portfolio. Determining portfolio weightage for individual stocks scientifically is the key to portfolio performance. The aviation market in India is witnessing a surge in demand and this demand-driven growth is creating some interesting investing opportunities in the airline sector in India. Our special report on aviation market in India talks about the investing opportunities in the sector. 

Various government initiatives and steps taken to build infrastructure in India, along with the improvement in corporate earnings this quarter, are keeping the markets in good mood. I think the economy will be on a roll by March 2018 and it may touch 7 per cent GDP growth once again and by 2019 we should see GDP growth touching 8 per cent. India is ready for a change and is seen embracing digital payments in a big way. Since demonetisation, the usage of digital payment system has increased substantially and this acceptance of digital payment technology nationwide, along with GST, will help push growth in the formal economy in India.

With great days ahead for our vibrant economy, equities will remain the flavour of the season for the investors, even if there is relative increase in volatility in the stock prices. So, focus on high conviction stocks that are not overvalued at this point of time. 

Invest smart — invest long term!.