This Diwali Let the Lights Shine Brighter!

A lot has happened since last Diwali that has led to the underperformance of the equity market globally. In fact, the equity market is yet to touch the level that we traded at last Diwali. The uncertain characteristics of the economy were misread by even the battery of experts from Ivy League. It reminds me of a quote of Israeli-American psychologist Daniel Kahneman who said, “We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events. We can be blind to the obvious and we are also blind to our blindness.” 

So, in hindsight it seems that the central banks waited too long to act and irrationally allowed the proverbial inflation genie out of the bottle when the inflationary curve started to rise in May 2021. This led the central banks to raise rates at the fastest pace in recent history. The problem with such hikes is that it tends to disrupt the financial markets and economy. We are already witnessing the impact of this in other markets such as bond and currency that have become quite volatile. Governments have had to take a U-turn on their policy decision to pacify the market. Therefore, volatility is here to persist for a while now

Nevertheless, in all this volatility, the Indian equity market remains an oasis of hope. Most of the malice present in the financial market elsewhere has not impacted us much and we have remained resilient. The Indian equity market has outperformed most of the emerging as well as developed markets in the last one year. This Diwali can be one of the best times in recent years to buy equities because the mood is that of cautious optimism and the valuations are reasonable, thus providing a better margin of safety.

Our cover story titled ‘Top Diwali Picks’ in the current issue discusses market performance over the past one year and throws some light on which sectors to focus on in the coming years. The best part of the cover story is our selection of stocks. The Diwali portfolio at DSIJ has a tradition of beating the markets consistently and we are fairly confident that this portfolio will also be a step ahead of the markets and win with flying colours. Meanwhile, the textile sector has been quietly consolidating and making its presence felt in the global markets. 

Our special story in this issue talks about the textile sector in India and discusses at length the opportunities and threats that lie therein. Huge opportunities exist in the textile sector and investors should benefit from the natural advantages the sector presents. The best way to create wealth in the stock market is to focus on sectors where maximum capital expansion is taking place.

Also, it is always profitable to remain invested in stocks or sectors where the earnings growth is most promising, consistent and visible. The next 12 months are undoubtedly going to be thrilling for each of us as the prominence of India grows globally. Some of the biggest money-making ideas will be churned in the next few years by the equity markets in India. My sense is that until and unless any other ugly skeleton does not come out of the closet such as the collapse of any major institution, we may see Nifty well over 20,000 by next Diwali. So here is wishing you and your family a very Happy and Prosperous Diwali. For now, the dark shadows of the pandemic are behind us and it is therefore time to rejoice!

RAJESH V PADODE
Managing Director & Editor