“You miss 100 percent of the shots you don't take." Wayne Gretzky, NHL Hall of Famer
For
over a week G20 had been trending the most on social media. Apart from bringing
consensus on many contentious geo-political, economical issues, one significant
achievement of G20 under the leadership Bharat that is India was expansion of
its family by including African Union. G20 has now become G21. Today Indian stock
markets celebrated the success of G20 summit and following it Nifty also
crossed the notable 20,000 mark, another 20+. Sensex also crossed 67,000 mark.
Market
behaviour over last three and a half year years have forced most investor to be
cautious of its last bull run starting April this year. After drastic fall in
March 2020 because of covid, market showed unprecedented recovery in very short
span of time and following it with a phenomenal bull run before slipping into a
range.
Markets
remained range bound between October 2021 & March 2023 before speeding up
again, where everyone started feeling markets are getting costlier. Matching
investors mood markets relaxed for over a month and now again are on the ropes,
moving up fast.
Sensex
a concentrated large cap index with only 30 companies in it maintained a PE of above
18 in 110 of the 112 months since June 2014. For the same period, Nifty which
is a little broader index with 50 stocks in it, also maintained PE of over 20
in 110 out of 112 months for the same period. Market Cap to GDP for almost 90%
the time remained above 80 during the period. So wondering should we really be
so concerned about the valuations or should we change our range with respect to
these parameters.
Like
many of you who are sitting on fence with good liquidity waiting for the
correction to happen and now developing the notion of ‘Fear of Missing Out’, I
am sure China would have also been gripped by Fear of Missing Out participating
at the G20 Summit and playing an active role.
And
that is my concern as well. With depressing economy, diminishing clout over the
world and thumping rise of India may lead China to get entangled in any
misadventure like Russia. Or it may smartly use Pakistan to engage India in such
sort of misadventure that may give India an opportunity to reclaim POK from
them.
Turkiye, last strong supporter of Pakistan from Muslim nations and
being the one who had always voted against India on various forums, seems to have
changed its perception about India after India helped them during covid and
earthquake. At G20 summit it advocated for India’s place in United Nations
Security Council, which indeed is a big thing.
But
China-Pak pair has found a new ally in Canada. After Pakistan, Canada has
become the second fostering ground for terrorists (Khalistani) against India. Its
prime minister’s press releases on so called ‘Freedom of Expression of these separatists’
and gesture of missing the dinner hosted by India for G20 Heads of Nation gives
strong signals.
We
visit history to seek reference and compare if the present has similarity to
any past event to guesstimate the future. I might sound cynical but I found two
similar situations and not from far off memory.
First
I would refer the political situation of ‘India Shining’ campaign of Atal
Bihari Vajpayee following which he lost election despite doing excellent work
for India within coalition constraints. Second reference is of strong bull run
in the markets between August 2007 and January 2008 when markets rose by around
30% in less than six months despite valuation being very high of those times
before diving deep into depression.
Aren’t
we in the similar situations? So should markets fall drastically sooner or
later. Honestly I don’t think so. As always we don’t know how markets will
behave over next few months or couple of years.
What
we know is, with all economic fundamentals and increasing Indian influence over global politics and economy there seems no good reason why Indian markets face
a deep correction. Also strong domestic fund flows into the markets through
SIPs and other institutional money will not let correction be very deep.
Remember
between October 2021 and March 2023 foreign investors pulled out almost 2.5
lakh crores from Indian markets. Had this happened a decade back, this could
have created havoc for Indian markets. But Indian markets sustained that fund
outflow and I believe will sustain this in future as well.
At
InvestmentMitra, we don’t know from which level market will correct or it will
correct or not but if it corrects, it shouldn’t be more than 10% from its top. And
for all those who are cautious and also have FOMO, should invest in Multi Asset
Allocation Fund or Balance Advantage Funds.
Talk
to your InvestmentMitra to review and plan your investments.
Thank
you.
Happy Investing!
Team InvestmentMitra
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