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Markets are at all Time High – But Where is the growth

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13.7.2018

"Without continual growth and progress, such words as improvement, achievement, and success have no meaning" – Benjamin Franklin

Above is the common and most natural feeling of most people. But those who are in the markets know that continual growth is only a whim. You can never have continuous spell of growth in any facet of life – like you can’t walk, talk, eat, sleep or do anything continually. You need to take a pause after a while before starting again. Same is true with markets – be it market for equity, debt, real estate, gold or any other asset class. One should not expect continuous growth in these assets. After some growth they will take a pause or retreat before starting all over again.

Owing to various factors markets tumbled after presentation of budget this year. Nfity and sensex – the barometers of Indian economy were down by over 10% from their peaks. Broader indices of smallcap and midcap categories were beaten more severely.  Sensex and Nifty have recovered their losses and are trading at their all time highs. But a strange thing is happening – markets are gaining new highs but value of any investor’s portfolio is not reflecting the same.

Sensex comprises of 30 stocks belonging to various sectors and each stock carry different weight in the composition of the sensex. What happening is that the prices of only handful of stocks of, 8-10 only, are rising and pushing Sensex to newer highs but most other stocks and especially stocks beyond top 100 are hardly moving. If your portfolio has these moving stocks then your portfolio will also be doing well or else it will trail returns of even sensex.  Should we worry – NO. As long as companies are doing well in their business, their market price will also catch up with that of leaders, sooner or later.

Till some time back we were seeing good macros in the economy but corporate performance was not matching due to one or the other reasons. Now reverse is happening. Corporate profitability is getting better and on track, capacity utilization has also increased but on macro front there are many worrisome factors. Inflation has touched 5, crude oil prices are rising, there are concerns about fiscal deficit – especially this being an election year, monsoon have not progressed well. RBI may increase interest rate further to contain inflation.

Globally also – one tension settles another takes over. North Korea’s nuclear threat had just faded that mongers of trade war have started raising their heads. It may impact the markets in the short run before economies in the world find new balances. Rising dollar, crude oil prices and uncertainties about the next step by US president will also cause volatility in the markets in near term. Therefore markets are likely to remain volatile for about a year at least till next general elections in India takes place with few spells of rising waves in between like the one happening currently.

What is the BEST Time To Invest

We keep coming across this question every now and then that what is the best time to invest. According to us at InvestmentMitra – Best time to invest is when you have funds. YES you read it right. We never advise investing borrowed money; therefore you need to have surplus funds to invest. The important thing to consider is when you want your money back. Once you know the time you have to invest for then only look for an investment product or opportunity matching your investment profile. If you don’t consider the time you have at your hand then you are very likely to invest in the wrong investment product. You may discuss the same with your financial advisor. Investment products are available for periods as short as overnight and for periods much beyond 20-30 years carrying different risk-return profile.

Currently for all our long term investors we are advising to put their bulk money in balance advantage kind of funds or use STP spread across over a year to invest in equity funds. SIPs are evergreen tool to create wealth over long term by investing small amounts every month. “Small drops make an ocean.” Our research says that if someone had been investing an amount of just Rs 10,000/- every month over last 20 years in a portfolio of five average performing schemes, his or her investments of Rs. 22.4 lakhs would have grown to over Rs. 2.55 crores. Such is the might of SIP.

What is more interesting is that many HNIs have also started investing through SIPs and true to their stature they are running SIPs of very large amounts. And following our advice many of them have also started SIPs in the name of their loyal servants to provide for their retirement life apart from buying health/term insurance cover for them. We salute the spirit of these people and their commitment to provide for social security to those who serve them.

Should you need to discuss your investments or seek an alternative opinion, do contact us at ajay@investmentmitra.com or you may call/whatsapp Naveen CFPTM  @9254673750 or Ajay @9958447700,

Happy investing!

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