The ability to decipher true investment information from noise is always key to successful investing- Richard Bernstein
Building wealth in equities isn’t about quick wins—it’s about patience, trust in strong companies, faith in the country’s growth, and tuning out the noise.Distractions will try to shake your focus, but true investors stay the course and win the war.
Markets may be down nearly 10% from the peak, but here’s the truth: wealth is built by buying equities at lower levels. India stands to be the most promising Emerging market story for the next few years, FII just can’t ignore India for long. Remember, the NIFTY 50 and Midcap 150 have delivered impressive returns of 33% and 55% over the past year. A breather is natural—stay focused on the bigger picture.
What has stalled the bull run?
1. Corporate Earnings. The Real Picture: For the Sept 2024 Quarter, the cumulative profit of 1353 Listed companies that have disclosed their results has decreased marginally by 0.60% Y-o-Y, making the first decline in cumulative earnings in 8 Quarters. The slowdown in corporate profit growth was evident even in the first quarter, where only a modest 1.6% growth was reported.
There are weaknesses in the oil and gas, automotive, cement, and FMCG sectors after long outperformance.
IMP: Kotak Institutional Equities has also revised its earnings expectations for the Nifty 50, projecting a growth rate of just 5% for FY25 and an impressive 17% for FY26. A significant jump in FY 26, which will start from April 2025. This correction aligns with stagnating corporate profitability for this FY.– Source: Money control.
In a nutshell: India’s corporate sector has indeed had a remarkable run recently, but as with any market, corrections of 10%-15% are a natural part of the cycle. These adjustments reflect the markets recalibrating to real, sustainable growth after a strong rally. Fundamentally, the India story remains robust, with the country positioned to be the top-performing large economy for at least the next decade.
2. Trump factor. The stock market has generally performed quite well regardless of who is in the White House. Since Jimmy Carter’s presidency (1977), the US S&P 500 has had double-digit annualised total returns during every presidential term except one. The US S&P 500 even returned nearly 13% a year (roughly 3% real return a year) during Carter’s inflationary years.
Looking ahead, the potential for geopolitical stability under Trump could further boost market sentiment. His stance against ongoing conflicts and his robust strategy to curb China’s growing influence could help other emerging markets and should improve global trade dynamics, offering new opportunities for market growth.
3. FII Selling: Foreign institutional investors (FII) have sold off $13 billion so far, amounting to just 1.6% of their total exposure. However, where else in the world can they find a growth story as compelling as India’s? With the economy expanding at a remarkable 7%-8% and inflation running at 5%-6%, India offers an impressive total return potential of 12%-14%.
No other major economy is poised to grow faster than India in this decade, making it an unparalleled opportunity for investors seeking long-term growth in a rapidly developing market.
Nifty could reach 30,000 when FIIs return- Ramdev Agrawal (co-founder of Motilal Oswal Financial Services)
4. It’s a correction: The markets saw a dip of over 10% in September 2022 and again in March 2023, only to make a swift and impressive comeback. Investors who seized the opportunity during these corrections reaped substantial gains. It’s all part of the natural cycle—a market correction following a stellar 33% rally. As we look ahead from November 2023 to September 2024, the same potential for growth and recovery exists, offering a prime opportunity for savvy investors to capitalize on the next wave of market strength.
5. The China Story: China’s GDP surged at an impressive average of 9% annually from 1980 to 2020, but those days of rapid growth are now behind them. Today, China can only dream of maintaining such momentum, with its growth now more in line with the global average of around 3%.
To sustain its previous high growth, China has accumulated massive debt, and even its enormous rescue package may not be enough to address the vast amounts of hidden liabilities lurking beneath the surface. The country now faces significant challenges as it grapples with debt levels that threaten its economic stability.
6. Asset Allocation: Asset allocation is the ultimate game changer in investing—it’s the key to building lasting wealth. By diversifying your investments, you spread risk, enhance growth, and ensure your portfolio remains resilient through every market cycle.
The truth is, you can’t build substantial wealth if you miss the market crashes. “Buy low and sell high” isn’t just a strategy; it’s the true definition of profit. Smart asset allocation empowers you to capitalize on opportunities, turning market dips into stepping stones toward greater financial success.
So, Cut the clutter, ignore the noise—and focus on what truly drives value.
